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COST    KEEPING   AND 
SCIENTIFIC    MANAGEMENT 


PublUhed   by  the 

Mc G r a^w -Hill    B ook. Comp £iny 

iSucce^sons  to  tKe&ooK.Deparhnents  of  tKe 

McGraw  Publishing  Company  Hill  Publishing"  Company 

.Publishers  of  Books  for 

Elec  trical  World  The  Engineering"  and  Mining  Journal 

Engineering  Record  Power  and  The  Engineer 

Electric  Railway  Journal  American   Machinlvst 

Metallurgical  and  Chemical  Engineering 


COST   KEEPING   AND 
SCIENTIFIC  MANAGEMENT 


BY 


(gM 


HOLDEN    A.    EVANS 

NAVAL  CONSTRUCTOR.  UNITED  STATES  NAVY 


McGRAW-HILL  BOOK  COMPANY 

239  WEST  39TH  STREET,  NEW  YORK 
6  BOUVERIE  STREET,  LONDON,  E.G. 

1911 


u 


tt^ 


Copyright,  igii^  by 
McGRAW-HILL  BOOK  COMPANY 


»  •  • 
•  •  • 


PREFACE 

This  book  is  written  for  jobbing  shops  and  small  manu- 
facturing plants  where  accurate  cost  keeping  and  the  principles 
of  good  management  have  received  but  little  attention.  It 
is  hoped  that  it  will  not  be  without  interest  to  the  officials  of 
large  manufacturing  establishments  and  shipbuilding  plants. 

Many  owners  and  managers  desire  to  improve  the  cost 
system,  but  are  deterred  by  the  belief  that  this  cannot  be  done 
without  the  aid  of  expert  accountants  who  will  devise  an 
elaborate  system  which  will  require  a  large  clerical  force  to 
maintain.  The  methods  which  I  have  outlined  are  simple 
and  require  but  little  clerical  labor.  Any  manager  can  adapt 
this  system  to  meet  the  requirements  of  his  work. 

The  efficiency  of  a  large  plant  under  my  supervision  has 
been  greatly  improved  by  adopting  and  following  the  princi- 
ples of  management  advocated  by  Mr.  Fred  W.  Taylor.  I 
believe  that  in  thousands  of  shops  marked  improvement  will 
be  made  if  these  principles  are  followed.  The  methods  de- 
scribed in  the  chapters  devoted  to  management  should  be  of 
assistance  to  the  manager  who  wishes  to  take  the  first  steps 
towards  Scientific  Management. 

HoLDEN  A.  Evans. 
Seattle,  Wash., 

June  I,  191 1. 


99f^n«d 


CONTENTS 

CHAPTER  PAGE 

I.    THE  IMPORTANCE  OF  ACCURATE  COSTS     .     .     .     .       i 
Cost  keeping   for  manufacturing  establishments  compara- 
tively simple  —  Repair  and  jobbing  shops  present  difficulties     • 
in  cost  accounting  —  Inaccurate  costs  among  manufacturers 
making  standard  articles  —  Lack  of  knowledge  of  costs  dis- 
turbs trade  —  The  reasons  for  so  few  accurate  cost  systems 

—  Cost  keeping  versus  accounting — Cost  systems  secret  and 
not  subject  to  criticism  —  Value  of  accurate  costs  frequently 
not  realized  by  some  successful  managers  —  Can  an  estab- 
lishment make  money  without  a  good  cost  system? 

XL    THE  PURPOSES  OF  A  COST  SYSTEM u 

Little  literature  on  cost  systems  for  manufacturing  estab- 
lishments—  What  a  manager  can  learn  from  a  proper  cost 
system  —  Monthly  scrutiny  of  indirect  charges  —  Monthly 
balance  desirable  —  Dividends  which  are  paid  from  capital 
and  not  from  profits  —  Is  every  department  a  money  maker? 

—  Definition  of  good  judgment. 

III.  THE  VARIOUS  ELEMENTS  OF  COST 23 

Direct  labor  —  Importance  of  accuracy  in  obtaining  direct 
labor  charges  —  Direct  material  —  Indirect  cost  —  Total  fac- 
tory cost  —  Elements  of  the  indirect  cost  —  Depreciation  — 
Usual  methods  of  determining  depreciation  —  Determination 
of  depreciation  to  be  charged  off  each  year — Methods  fol- 
lowed for  estimating  and  apportioning  depreciation  usually 
unsatisfactory  —  Taxes  and  insurance  —  Up-keep  of  plant  — 
Interest  and  rent. 

IV.  DISTRIBUTION  OF  INDIRECT  COSTS 40 

Distribute  indirect  costs  in  accordance  with  benefits  re- 
ceived—  Distribution  by  machine  rates  the  most  scientific 
method  —  Difficulties  in  using  the  machine  rate  system  — 
Inaccuracies  of  distribution  by  direct  labor  method  —  Dis- 
tribution by  direct  labor  —  The  use  of  monthly  rates  or 
average  rates  —  Most  simple  method  of  distribution  best  for 
majority  of  shops  —  The  work  in  each  shop  or  department 
should  carry  its  own  expense  burden  —  Power  plant  ex- 
pense —  Storehouse  expense  —  General  expense^ —  Distribu- 
tion of  general  expense  and  shop  expense  —  Selling  expense. 

V.    PRODUCTION  ORDER,  SHOP  ORDER  AND  COST  SEC- 
TION RECORDS 55 

Uniform  sizes  for  blank  forms  —  The  production  order  — 
Shop  orders  issued  by  authority  of  the  production  order  — 
Mustering  the  workmen  —  Record  of  labor  charges  —  Record 
of  material  charges  —  Labor  and  material  charged  to  ex- 
pense orders  —  Cost  section  records  —  Job  order  card  —  Cost 
figures  should  be  used  and  not  treated  as  mere  records  — 
The  cost  of  work  card  —  Summary  of  material  requisitions 

—  Advantages  and  disadvantages  of  the  system. 

,vii 


CONTENTS 
CHAPTER  PAGE 

VI.    INDIRECT  CHARGES 7^ 

Subdivision  of  indirect  charges  —  Charge  symbols  for  ex- 
pense account  orders  —  General  expense  subdivisions  —  Shop 
expense  subdivisions  —  Power,  heat  and  light  subdivisions  — 
Storehouse  expense  subdivisions  —  Distribution  of  store- 
house expense  —  Part  plant  development  —  Plant  develop- 
ment account  —  Selling  expense  subdivisions  —  Distribution 
of  selling  expense. 

VII.  SUPERVISION  OF  THE  EXPENSE  ACCOUNTS  .  .  .  St 
Works  manager  versus  financial  control  —  Ignorance  of 
the  relation  of  overhead  charges  to  total  cost  —  Danger  of 
superficial  criticism  of  expense  accounts  —  Increase  of  shop 
expense  frequently  results  in  increased  efficiency,  while  a 
decrease  results  in  decreased  efficiency  —  Comparison  of  ex- 
pense percentages  of  different  establishments  gives  no  infor- 
mation —  The  control  of  the  expense  charges  —  Monthly 
analysis  of  all  expenses. 

VIII.    METHODS  FOLLOWED  IN  THE  PAYMENT  OF  LABOR  loo 
Day    work    system  —  Contract    system  —  Halsey    premium 
system  —  Premium  system  compared  with  the  bonus  system 
—  Gantt  bonus   system  —  Taylor  differential  piece  rate   sys- 
tem—  Fixing  rates  and  standard  times. 

IX.    MANAGEMENT 114 

Improvement  made  by  an  analysis  of  costs  compared  with 
.  improvement  due  to  scientific  methods  —  The  correct  type  of 
management  —  Management  is  an  art  —  Opposition  to  the 
new  type  of  management  —  Scientific  management  defined  — 
Analysis  should  be  made  of  work  to  be  accomplished  before 
it  is  undertaken — Best  methods  for  accomplishing  work 
should  be  determined  before  it  is  begun  —  Men  best  suited 
to  the  work  should  be  used  —  Importance  of  maintaining 
tools  and  appliances  in  excellent  condition  —  Real  cooper- 
ation between  employers  and  employees  —  To  follow  the 
principles  of  scientific  management  is  not  a  simple  problem. 

X.  WASTED  TIME  DETECTED  BY  TIME  STUDIES  .  .  127 
Few  managers  realize  the  large  amount  of  time  wasted 
in  the  average  shop  —  Time  wasted  due  to  loafing  —  Wasted 
time  due  to  employment  on  unsuitable  work  —  Time  wasted 
due  to  unnecessary  waits  —  Time  wasted  due  to  poor  equip- 
ment— -A  manager  should  know  the  time  wasted  and  the 
causes  —  Stop-watch  time  studies  expose  defects  in  methods, 
organization  and  equipment  —  Stop-watch  time  studies  in  a 
drop  forge  shop  —  Stop-watch  time  studies  bring  out  funda- 
mental conditions  under  which  work  is  accomplished  —  Im- 
provements made  in  a  large  smith  shop  due  to  time  studies. 

XI.    THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT 

WHICH  CAN  BE  FOLLOWED  BY  A  MANAGER    .     .  137 

It  requires  both  ability  and  experience  to  become  an  expert 
in  scientific  management  —  Duties  of  officials  should  be^ 
clearly  defined  —  Diagram  of  organization  should  show  limits'^ 
of  authority  and  responsibility  of  each  department  head,  and 
their  relations  to  each  other  —  Similar  duties  should  be 
brought  together  to  be  performed  by  one  man  or  group  of 
men  —  Shops  should  be  controlled  by  an  expert  shop  super- 
viii 


CONTENTS 
CHAPTER  PAGE 

intendent  —  Shop  superintendents  should  have  competent 
assistants  —  Changes  should  not  be  undertaken  until  thor- 
oughly investigated  and  effects  fully  considered  —  Investiga- 
tion of  small  tool  equipment  —  Investigation  of  the  care  of 
belting  —  Investigation  of  machine  tools  and  transmission 
machinery — Care  of  jigs,  and  special  tools  —  Introduction 
of  functional  duties  —  Selection  of  assistants  and  gang 
bosses  —  Beginning  of  the  planning  department  —  The  use 
of  time  studies  —  Improvement  of  plant  equipment  —  Stand- 
ardization of  shop  methods  —  Functional  management  out- 
side of  shops  —  Improvement  of  store  system. 

XII.    METHODS    WHICH    LEAD    TOWARDS     SCIENTIFIC 

MANAGEMENT 169 

Improvement  in  a  government  establishment  made  by  the 
application  of  the  principles  of  scientific  management  — 
Shop  system  employed  based  on  the  teachings  of  Mr.  F.  W. 
Taylor — Delivery  of  papers  between  shops  and  offices  — 
Records  of  workmen  —  Shop  orders  and  promises  for  com- 
pletion of  work — -Material  supply — Urgent  work  or  papers 

—  Transportation  of  material — Plant  railway  system — 'Re- 
ceiving and  dispatching  space  in  each  shop  —  Central  tool 
grinding  and  issue  room  —  Weekly  conference  of  heads  of 
departments  and  foremen  —  Daily  conference  of  manager 
and  heads  of  departments. 

XIII.  MACHINE  SHOP  METHODS 184 

General  instructions  —  The  results  to  be  obtained  by  the 
planning  department — Planning  department  and   shop  staff 

—  Duties  of  the  chief  planner  —  Duties  of  the  material  man 

—  Duties  of  the  instruction  card  man  —  Duties  of  the  stand- 
ing order  board  man  —  Duties  of  the  shop  clerk — Duties  of 
the  time  study  man  —  Duties  of  the  foreman  —  Duties  of  the 
gang  boss  —  Duties  of  the  speed  boss  —  Duties  of  the  in- 
spector— ^  Duties  of'the  move  man  —  Dulies  of  the  head  tool 
maker  —  Duties  of  the  repair  man  —  Duties  of  the  belt  man 

—  Delivery  of  tools  to  machines' — The  operation  of  the  sys- 
tem—  Cooperation  among  the  planners  and  the  shop  staff. 

XIV.  ORGANIZATION  OF  A  SMITH  SHOP,  A  WOOD-WORK- 

ING SHOP,  AND  A  CANVAS  AND  FLAG  SHOP     .     .  208 

The  blacksmith  shop  —  General  arrangement  of  shop* — 
Subdepartments  of  the  shop — ^  Duties  of  foreman  —  Duties 
of  assistant  foremen  —  Duties  of  route  man  —  Duties  of 
office  clerk  —  Duties  of  material  man  and  move  man  — 
Operation  of  the  shop  system  —  Organization  of  a  large 
wood-working  shop  —  Details  of  shop  system  —  Organiza- 
tion of  a  canvas  shop  and  flag  shop  —  Details  of  shop  sys- 
tem. 

XV.    REDUCTIONS  IN  COST  DUE  TO  SCIENTIFIC  METH- 
ODS      232 

Reductions  made  in  shipbuilding  costs  —  Reductions  in 
boat  building  costs  —  Reductions  in  the  cost  of  wood  calking 
• —  Changes  made  in  a  boiler  shop  and  resulting  reductions  in 
costs  —  Reductions  in  the  cost  of  machine  shop  work  — 
Records  of  time  reductions  in  canvas  work. 


COST    KEEPING   AND 
SCIENTIFIC    MANAGEMENT 


COST    KEEPING 
AND    SCIENTIFIC    MANAGEMENT 

CHAPTER  I 

The  Importance  of  Accurate  Costs 

Many  manufacturing  establishments  throughout  the  country 
have  excellent  cost  systems,  and  in  the  majority  of  these  the 
value  of  costs  is  well  understood  and  the  data  obtained  from 
the  cost  records  are  utilized  to  their  full  value.  On  the 
other  hand,  there  are  far  too  many  establishments  in  which 
little  use  is  made  of  costs  other  than  in  fixing  selling  prices, 
and  in  some  cases  costs  are  not  obtained. 

The  most  accurate  cost  systems  are  usually  found  in  estab- 
lishments where  but  few  classes  of  standard  articles  are 
manufactured.  This  is  readily  explained,  as  it  is  compara- 
tively easy  to  devise  a  satisfactory  system  for  such  an  estab-' 
lishment,  and  it  is  so  simple  that  it  is  difficult  to  go  wrong  in 
its  application.  Moreover,  the  cost  of  maintaining  such  a 
system  is  small.  Accurate  cost  keeping  in  its  simplest  form 
may  be  applied  to  the  manufacture  of  a  single  class  of 
standard  articles.  As  the  number  of  classes  is  enlarged,  par- 
ticularly if  the  products  vary  greatly,  cost  keeping  becomes 
more  difficult  and  expensive.  Notwithstanding  this,  nearly 
all  strictly  manufacturing  establishments  have  fairly  satisfac- 
tory cost  accounts. 

In  a  jobbing  shop  or  in  a  combined  manufacture  and 
repair  shop  accurate  cost  keeping  is  not  simple.  The  princi- 
pal difficulty  experienced  is  the  proper  distribxition  of  the  ex- 
pense burden.  It  is,  therefore,  natural  that  the  worst  ex- 
amples of  cost  keeping  should  be  found  in  these  classes  of 
shops.     In  some  of  these  establishments  attempts  are  made 

I 


2  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

to  obtain  accurate  costs,  but  in  the  great  majority  the  results 
are  not  worthy  of  the  name  of  cost  records.  Little  is  known 
of  the  advantages  to  be  gained  by  accurate  costs,  and  there 
is  comparatively  little  interest  shown  in  the  subject.  In  many 
of  the  smaller  establishments  the  owner  or  manager  has  risen 
from  the  shop  and  he  knows  little  or  nothing  of  modern 
accounting.  When  he  worked  in  the  shop  the  cost  record 
consisted  of  the  time  books.  Such  an  owner  or  manager  has 
a  horror  of  red  tape,  and  to  him  modern  cost  keeping  is  red 
tape  to  an  extreme  degree.  Under  these  conditions  it  is  not 
surprising  that  accurate  cost  records  in  jobbing  repair  shops 
are  very  rare. 

Accurate  cost  keeping  is  very  difficult  in  a  large  shipyard 
which  is  engaged  both  on  new  work  and  repair  work.  There 
are  numerous  independent  shops  in  such  an  establishment 
which  vary  greatly  in  equipment  and  in  the  class  of  the 
products.  It  is  necessary  that  the  costs  should  be  known 
not  only  by  the  many  jobs  included  in  the  whole,  but  also  by 
shops,  and  by  the  classes  of  labor  employed.  The  proper 
distribution  of  the  overhead  burden  is  also  exceedingly  diffi- 
cult. These  questions  will  be  discussed  in  detail  in  subsequent 
chapters. 

INACCURATE    COSTS    AMONG    MANUFACTURERS    MAKING 
STANDARD    ARTICLES. 

Accurate  costs  are  sometimes  not  obtained  even  in  establish- 
ments where  more  or  less  standard  articles  are  manufac- 
tured. The  report  of  the  cost  committee  of  the  National 
Machine  Tool  Builders*  Association  contains  the  following 
significant  statement:  "Machine  tool  manufacturers  making 
similar  and  competitive  machine  tools  discovered  among  them- 
selves ruinous  and  unprofitable  competition,  based,  presuma- 
bly, on  actual  costs.  Comparisons  showed,  however,  that 
^ven  where  there  were  fair  cost  system  methods,  important 
and  appreciably  large  elements  were  treated  by  different  man- 
ufacturers in  different  ways." 

This  is  a  polite  way  of  stating  that  some  of  the  members 


THE    IMPORTANCE    OF    ACCURATE    COSTS  3 

of  the  machine-tool  builders'  association  did  not  obtain  actual 
costs,  in  that  they  omitted  some  of  the  important  elements 
that  go  to  make  up  total  costs.  These  makers  were  selling 
their  goods  below  cost  and  were  demoralizing  the  entire  busi- 
ness. They,  however,  did  not  know  this;  they  undoubtedly 
considered  that  they  wer£  making  a  fair  profit,  when  sud- 
denly they   found  themselves  face  to   face  with  bankruptcy. 

If  these  conditions  exist  in  the  manufacture  of  machine 
tools,  is  it  to  be  wondered  at  that  the  shipyards,  where  cost 
keeping  is  far  more  difficult,  do  not  know  their  costs?  Is  it 
surprising  that  the  thousands  of  jobbing  repair  shops  do  not 
know  what  cost  keeping  means  ? 

The  machine-tool  builders  were  aroused  by  the  gravity  of 
the  situation.  They  appointed  a  committee  which  devised  a 
uniform  cost-keeping  system  which  can  be  successfully  em- 
ployed by  all  makers  of  machine  tools.  No  doubt  this  system 
is  not  used  by  all  machine-tool  builders,  but  the  report  of  the 
committee  was  widely  read  and  studied  by  them  and  general 
interest  was  created  in  the  importance  of  accurate  costs.  This 
brought  beneficial  results,  and  the  costs  now  recorded  more 
nearly  represent  actual  costs. 

Unfortunately  no  uniform  cost  system  can  be  devised  for 
the  various  manufacture  and  repair  plants  throughout  the 
country.  The  successful  system  must  be  developed  for  each 
class  of  work  and  adapted  to  meet  local  conditions.  There 
are,  however,  ftmdamental  principles  of  great  importance 
which  are  applicable  to  all  systems.  These  principles  are  vio- 
lated in  thousands  of  establishments,  and  until  this  is  cor- 
rected actual  costs  are  impossible. 

It  is  of  importance  to  every  manufacturer,  it  is  to  the  benefit 
of  every  stockholder  in  an  industrial  establishment,  that  inter- 
est should  be  awakened  in  cost  accounting,  and  that  accurate 
costs  should  be  obtained  in  every  manufacturing  shop  and 
every  repair  shop  in  the  country.  Just  so  long  as  costs  are 
not  known  there  will  be  the  same  ruinous  competition  that 
existed  in  the  machine-tool  trade. 


4  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

LACK    OF    KNOWLEDGE   OF    COSTS   DISTURBS    TRADE. 

The  competition  which  most  feared  by  a  well-conducted 
establishment  is  that  of  the  establishment  which  does  not 
know  its  costs.  It  is  often  the  case  that  a  well-conducted, 
efficient  establishment  which  has  figured  on  a  moderate  profit 
is  far  underbid  by  a  less  efficient  establishment,  and  the  work 
taken  at  a  price  below  actual  cost.  It  is  no  satisfaction  to  the 
efficient  establishment  to  know  that  the  successful  bidder  will 
soon  go  into  bankruptcy,  for  there  will  be  someone  else  in 
the  field  with  as  little  knowledge  of  real  costs.  These  condi- 
tions demoralize  business  and  they  will  continue  until  actual 
costs  are  known.  This  situation  explains  what  otherwise 
might  be  considered  remarkable  variations  in  bids  submitted 
for  the  same  work  by  a  number  of  establishments  located  in 
the  same  vicinity  and  working  under  approximately  the  same 
conditions.  It  is  not  unusual  to  see  such  bids  vary  from 
50  per  cent,  to  100  per  cent. 

In  a  large  repair  job  which  recently  came  under  my  ob- 
servation, the  specifications  of  the  work  were  in  great  detail, 
and  called  for  exactly  the  work  to  be  accomplished.  The 
bids  that  were  received  ran  all  the  way  from  $425,000  to 
$5.17,000.  I  recently  obtained  bids  on  some  small  cast-iron 
cylinders,  rough  machined,  for  small  engines.  These  ran 
from  6  cents  to  21  cents  per  pound. 

A  few  years  ago  it  was  not  unusual  for  bids  on  battleships 
to  differ  by  as  much  as  half  a  million  dollars.  This  enormous 
difference  did  not  represent  difference  in  efficiency  of  the  ship- 
yards, nor  difference  in  the  cost  of  labor  or  material,  nor 
difference  in  the  figured  profits.  It  was  almost  entirely  due 
to  lack  of  knowledge  of  actual  cost  of  similar  battleships 
previously  built.  It  was  due  to  these  causes  that  large  con- 
tracts for  warships  were  taken  at' prices  far  below  cost,  and 
consequently  several  yards  were  forced  into  bankruptcy. 
These  experiences  have  taught  their  lessons  and  there  are  few 
of  the  shipyards  that  do  not  now  know  at  least  their  total 
costs  on  each  contract. 


THE    IMPORTANCE    OF    ACCURATE    COSTS  5 

In  small  shops,  however,  the  lesson  is  not  so  quickly  learned. 
A  shop  goes  under  here  and  t^^ere,  but  the  real  cause  is  not 
known,  and  another  takes  its  pi.  p^,  and  there  always  seems  to 
be  enough  shops  without  a  knowledge  of  costs  to  keep  business 
disturbed.  On  the  Pacific  Coast  these  conditions  prevail  at 
present,  and  there  is  little  prospect,  except  through  luck,  of 
the  most  efficient  shop,  which  has  figured  on  a  moderate 
profit,  securing  a  contract  where  bids  are  required.  It  is 
fortunate  for  these  that  many  contracts  are  placed  without 
requiring  bids.  Not  only  would  accurate  cost  keeping  pre- 
vent this  demoralization  of  business,  but  it  points  the  way  to 
more  efficient  production. 

V^HY    ARE    THERE    SO    FEW    ACCURATE    COST    SYSTEMS? 

The  present  condition  of  affairs  is  difficult  to  explain,  as 
competition  is  keen  and  the  American  manufacturer  is  pro- 
gressive. In  many  cases  the  owner  or  manager  has  risen 
from  his  tools  and  his  success  is  due  to  his  intimate  knowledge 
of  the  work  and  his  ability  to  direct  shop  operations.  When 
the  plant  was  small  he  figured  his  own  costs  and  made  his  esti- 
mates for  new  work.  With  his  ability  and  his  intimate 
knowledge  of  every  detail  of  the  work  he  was  able  to  do 
this  with  considerable  accuracy.  His  plant  has  now  grown 
beyond  the  one-man  stage.  The  costs  are  kept  by  men  who 
have  no  shop  experience,  and  estimates  for  new  work  are 
made  by  men  who  have  neither  the  experience  nor  the  a^lity 
of  the  manager  and  are  based  on  the  cost  records  of  previ- 
ous similar  work.  The  manager  does  not  realize  that  his 
subordinates  cannot  with  the  same  machinery  produce  the 
results  that  he  obtained.  He  also  forgets  that  the  times  have 
changed  and  that  keen  competition  requires  that  his  cost  rec- 
ords should  clearly  show  him  how  every  penny  is  expended. 
In  his  day  in  the  shops  there  were  no  elaborate  cost  systems, 
and  he  can  see  no  need  for  such  systems  now.  He  has  been 
progressive  in  keeping  his  plant  supplied  with  up-to-date  ma- 
chine tools;  this  is  his  line  and  he  sees  the  benefits  to  be 
derived   from  modern  plant  equipment.     He  is  out  of  date 


\ 


6  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

with  his  cost  system;  this  is  not  his  line  and  he  cannot  see 
the  benefits  to  be  obtained.  He  cannot  reahze  that  one  is 
fully  as  important  as  the  other. 

Sometimes  a  manager  erroneously  believes  himself  to  be 
progressive  regarding  his  cost  records.     He  has  read  some- 
thing on  cost  keeping  and  has  heard  a  discussion  of  the  im- 
portance of  the  subject  at  the  last  meeting  of  his  technical 
society.     He  decides  that  he  will  improve  his  methods  and 
directs  his  secretary  or  bookkeeper  to  put  in  a  modern  sys- 
tem.    The  latter  has  made  no  special  study  of  the  subject,  and 
after  getting  the  information  that  he  can  obtain  from  nearby 
plants  and  securing  some  of  their  blank  forms  he  makes  a 
number  of  changes  and  perhaps  secures  somewhat  better  re- 
sults.    Frequently,  however,  no  improvement  is  made  in  the 
accuracy  of  the  results,  and  the  shops  are  required  to  make  a 
number  of  useless  reports.     The  secretary  reports  progress 
to  the  manager,  and  points  out  the  advantages  of  his  system 
over  that  of  a  nearby  competitor.     If  the  manager  were  try- 
ing new  methods  in  the  shop  he  would  not  be  satisfied  with 
general    reports.     He    would    see    for    himself    exactly    the 
changes  made  and  the  results  obtained.     He,  however,  is  lit- 
tle interested  in  accounting  and  knows  but  little  of  cost  keep- 
ing, and  he  accepts  the  statements  of  his  secretary  and  is  satis- 
fied, while  in  reality  little  or  no  improvement  has  been  made. 
Some  owners  and  managers  who  have  been  impressed  with 
the  value  of  accurate  costs,  and  see  the  necessity  for  improve- 
ment in  their  cost  systems,  have  employed  expert  accountants 
to  install  a  cost  system,  who  have  had  no  shop  experience  and 
who  have  no  knowledge  of  shop  methods.     This  has  resulted 
in   a    system   entirely   unsuited   to   the   business,    which   has 
brought  endless  red  tape  without  producing  results. 

COST    KEEPING    VERSUS    ACCOUNTING. 

There  is  a  line,  faint,  perhaps,  but  nevertheless  a  dividing 
line,  between  cost  keeping  and  accounting.  Cost  keeping  is 
only  concerned  in  placing  in  the  most  direct  way  the  cost  of 
every  element  that  goes  to  make  the  total  cost  of  the  product. 


THE  IMPORTANCE  OF  ACCURATE  COSTS  7 

These  costs  should  be  so  recorded  that  the  manager  can 
readily  discover  all  excessive  costs,  whether  they  be  direct 
costs  or  an  element  of  the  expense  burden.  Accounting  be- 
gins where  cost  keeping  leaves  off.  The  preparation  and  in- 
stallation of  a  cost  system  is  the  work  of  a  shop  expert  who 
has  made  a  study  of  the  application  of  simple  accounting  to 
shop  methods.  Scientific  shop  management  and  accurate 
cost  keeping  are  inseparable.  Scientific  management  cannot 
exist  without  accurate  costs.  The  methods  followed  in  ob- 
taining good  management  in  the  shops  are  closely  interwoven 
with  the  methods  employed  to  secure  accurate  costs.  Costs 
are  a  means  to  secure  a  certain  definite  end,  and  the  most 
important  function  of  costs  is  to  aid  in  securing  better  man- 
agement, greater  efficiency,  and  a  reduction  in  the  cost  of 
manufacture. 

The  shop  organizer  knows  exactly  the  form  in  which  costs 
will  give  the  greatest  aid.  He  is  not  interested  in  costs  as 
costs,  but  only  as  a  step  to  secure  better  results.  He  knows 
what  is  really  required  and  what  is  useless.  He  knows 
whether. the  routine  required  to  secure  certain  data  will  retard 
the  production  of  work  or  not.  In  other  words,  he  has  a 
comprehensive  view  of  the  whole  subject  and  is  able  to  reject 
all  that  is  of  no  value  in  securing  the  end  for  which  he  is 
striving,  that  is,  the  greatest  efficiency  and  the  lowest  produc- 
tion cost. 

An  expert  accountant  has  no  such  view  of  the  subject.  He 
does  not  know  what  will  aid  in  the  reduction  of  costs  and 
that  which  will  not.  He  does  not  know  the  form  in  which 
costs  can  best  be  used  in  producing  efficiency.  He  is  only 
interested  in  costs  as  such.  He  has  no  knowledge  of  the 
actual  work  and  has  no  interest  in  it.  He  will  require  rec- 
ords which  cost  much  to  obtain,  which  interfere  with  the 
operation  of  the  work  and  which  serve  no  useful  purpose  in 
increasing  efficiency  after  they  are  secured. 

An  expert  on  shop  management  can  learn  the  simple  ac- 
counting required  in  a  very  short  time.  In  fact,  he  cannot 
be  an  expert  without  this  knowledge.     An  expert  accountant 


8  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

cannot  learn  shop  methods  and  shop  conditions  in  years. 
An  expert  shop  organizer  will  not  undertake  the  reorganiza- 
tion and  improvement  of  a  plant  unless  he  is  allowed  to 
devise  and  install  the  cost  system.  He  knows  that  any  at- 
tempt to  use  a  cost  system  which  does  not  dovetail  with  his 
shop  methods  will  greatly  retard  his  work  in  producing  greater 
efficiency.  The  employment  of  an  expert  accountant  to  de- 
vise and  install  a  cost  system  in  a  manufacturing  and  re- 
pairing plant  is  an  absurdity.  Yet  this  mistake  has  been 
made  by  many  and  the  results  are  almost  invariably  unsat- 
isfactory. 

COST  SYSTEMS  SECRET  AND   NOT   SUBJECT  TO   CRITICISM. 

The  manufacturer  who  closes  his  shop  to  visitors  soon 
finds  himself  behind  the  times.  The  exchange  of  ideas  and 
criticism  among  manufacturers  assists  in  advancement.  Some 
years  ago  many  manufacturers  did  not  welcome  visitors,  but 
now  a  progressive  manager  welcomes  a  competitive  man- 
ager and  gives  up  his  time  to  show  him  the  plant,  and  both 
gain  by  such  visits.  This  condition  does  not  obtain  regard- 
ing the  cost  system,  and  it  is  very  rare  for  a  manager  to 
permit  a  competitor  to  examine  his  cost  system,  nor  does  he 
desire  to  explain  the  methods  followed.  The  cost  system 
is,  therefore,  not  subjected  to  criticism,  and  managers  and 
owners  are  ignorant  of  glaring  defects  which  would  be 
brought  to  light  if  secret  methods  were  not  employed.  It 
is  curious  that  nearly  all  managers  believe  that  they  have 
very  satisfactory  cost  systems,  and  the  worst  are  usually 
described  as  "  simple  and  eflfective." 

Less  secrecy  will  bring  about  the  downfall  of  many  cost 
clerks,  but  will  also  improve  the  accuracy  of  costs. 

VALUE    OF   ACCURATE    COST    KEEPING    FREQUENTLY    NOT    REAL- 
IZED   BY    SUCCESSFUL    MANAGERS. 

Many  successful  managers  do  not  know  the  value  of  ac- 
curate costs.  They  know  the  necessity  for  the  total  cost 
to  fix  the  selling  price  of  manufactured  articles,  but  they  do 


THE    IMPORTANCE    OF    ACCURATE    COSTS  9 

not  know  that  well-kept  costs  will  point  the  way  for  greater 
efficiency  in  production  and  a  .consequent  reduction  in  costs. 
The  successful  manager  as  he  advanced  from  his  tools  to 
foreman  and  from  foreman  to  superintendent  was  employed 
in  plants  much  smaller  than  the  present-day  plants.  As  he 
advanced  in  the  supervisory  positions  he  had  absolute  con- 
trol of  every  operation.  He  knew  the  ability  of  each  man 
under  him.  He  was  quick  to  see  every  extravagance,  every 
lost  moment  of  time,  every  leak,  and  he  was  quick  to  apply 
corrective  measures.  It  was  these  qualities  that  made  him 
manager  or  owner  of  the  large  plant  that  he  now  controls. 

He  expects  his  subordinates  —  his  department  heads  —  to 
do  as  he  did.  He  forgets  that  the  work  is  more  exacting, 
that  the  department  heads  have  more  sub-departments,  more 
men.  He  forgets  that  these  department  heads  frequently 
have  not  his  ability,  and  that  many  extravagances,  many 
leaks,  will  not  be  remedied.  Such  a  manager  should  pro- 
vide the  necessary  machinery  to  point  the  way  for  improve- 
ments, and  establish  a  check  on  subordinate  officials.  A 
well-devised,  accurate  cost  system  is  the  machinery  required. 

In  the  report  of  the  committee  of  the  National  Machine 
Tool  Builders'  Association  the  following  statement  is  made: 
''  The  day  will  come  when  no  manufacturer  who  has  a  per- 
manent and  growing  success  can  have  that  success  without 
a  complete  and  accurate  cost  system.  And  such  a  system 
will  be  as  essential  in  the  business  of  manufacture  as  a 
good  superintendent  and  a  good  organizer  and  good  work- 
men." 

CAN  AN  ESTABLISHMENT  MAKE  MONEY  WITHOUT  A  GOOD  COST 

SYSTEM  ? 

The  question  naturally  arises,  are  not  many  of  the  con- 
cerns which  are  without  good  cost  systems  making  money? 
Undoubtedly  they  are,  but  how  often  do  we  see  a  shop  with 
antiquated  machinery  making  money?  Owing  to  other  ad- 
vantages this  is  done  in  spite  of  the  inferior  plant  equipment. 
If  the   same   shop   had   modern   tools   it   would   make   much 


lO  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

more  money.     The  same   is  true  of  the  cost  system.     The 

manufacturer   who   once   gets   an   accurate   cost   system  will 

"  never  give  it  up.     He  considers  it  far  more  important  than 

his    best   machine   tools.     The   shop   that    is   making   money 

without  a  cost  system   is   depending  almost   entirely  on  the 

Igood  judgment  of  its  manager  and  superintendent,  and  luck. 

\  Oftentimes  the  manager  and  superintendent  must  guess  when 

jthey  should  knozv.     Give  these  same  men  the  facts  that  are 

I  given  by  accurate  costs  —  give  them  an  accurate  record  of 

'  what  is  taking  place  in  the  plant,  as  shown  by  a  proper  cost 

system  —  and  they  can  apply  their  judgment  to  much  better 

effect.     Knowledge  then  takes  the  place  of  guesswork. 


CHAPTER  II 
The  Purposes  of  a  Cost  System 

There  is  a  remarkable  lack  of  interest  on  the  part  of  many 
owners  and  managers  in  accurate  cost  accounting.  Approach 
a  manager  to  tell  him  of  a  new  tool  or  appliance  which 
will  reduce  the  cost  of  production  and  he  is  immediately  inter- 
ested. He  listens  to  the  explanation  of  the  new  machine 
and  if  it  appears  to  have  merit  he  investigates  its  applica- 
tion to  his  work,  and  if  he  sees  that  the  reduction  that  can 
be  made  in  production  costs  warrants  the  outlay,  he  will 
purchase.  Not  a  few  managers  employ  outside  experts  to 
study  the  products  of  the  concern  and  the  methods  of  manu- 
facture in  order  that  better  suited  machine  tools  may  be 
provided  or  better  appliances  devised.  The  manager  knows 
that  these  methods  mean  progress;  that  by  them  greater 
efficiency  is  obtained  and  the  cost  of  production  reduced. 
This  increases  profits  and  he  is  not  only  interested  because 
of  the  pecuniary  reward,  but  also  because  increased  profits 
mean  success. 

Nearly  all  men  are  more  interested  in  what  the  world 
calls  success  than  in  the  pecuniary  rewards  that  come  with 
success.  To  the  majority  of  men  the  striving  for  success  and 
its  attainment  makes  life  worth  living. 

It  is  very  different  in  regard  to  suggested  improvements 
in  the  cost  system.  To  many  managers  detail  cost  figures 
are  not  an  essential  part  of  the  system  that  brings  success. 
To  a  great  many,  costs  are  mere  data  —  the  record  of  what 
is  past  and  gone.  To  such,  costs  are  a  necessary  evil  — 
necessary  in  that  they  are  required  to  tell  whether  the  man- 
ager has  failed  or  succeeded,  and  this  to  many  is  told  only 
by  the  final  balance. 

Very    few   managers   can   tell   how   their   costs    are   kept. 

II 


12  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

They  can  tell  in  detail  every  operation  in  the  shops,  because 
they  know  the  importance  of  these  and  are  interested.  They 
do  not  know  the  value  and  importance  of  costs  and  they  are 
not  interested.  They  leave  the  cost  keeping  to  the  book- 
keeper and  the  cost  clerk.  They  consider  this  a  detail  of  the 
organization  that  can  well  be  left  to  poorly  paid  clerks.  In- 
terest in  scientific  shop  management  will  bring  intelligent  in- 
terest in  costs,  for  scientific  management  cannot  exist  without 
accurate  costs.  An  organizer  cannot  intelligently  organize 
unless  he  knows  conditions,  and  an  accurate  cost  system  is  an 
exact  record  of  the  conditions.  It  is  the  pulse  of  the  organ- 
ization and  every  beat  that  is  out  of  harmony  in  the  organiza- 
tion is  faithfully  recorded. 

LITTLE    LITERATURE    ON    COST    SYSTEMS    FOR    MANUFACTURING 
ESTABLISHMENTS. 

A  manager  who  desires  to  obtain  satisfactory  literature 
on  cost  accounting  as  applied  to  manufacture  and  repair 
shops  may  make  a  wide  search  and  still  not  be  well  rewarded. 
He  will  find  a  large  number  of  books  on  accounting,  many 
of  which  are  excellent,  as  commercial  accounting  has  re- 
ceived wide  attention  and  has  been  carefully  considered  by 
experts.  In  nearly  all  of  these  books  there  are  a  few  chap- 
ters on  cost  keeping  for  manufacturing  concerns,  but  the 
treatment  of  this  subject  is  not  satisfactory.  It  is  treated 
from  the  point  of  view  of  the  expert  accountant,  and  this 
is  not  the  same  as  that  of  the  progressive  manufacturer  or 
the  expert  shop  organizer.  The  subject  is  considered  in  "an 
academic  way,  and  the  methods  suggested  have  not  been 
worked  out  in  detail  and  applied  to  a  manufacturing  con- 
cern. There  is,  however,  much  to  be  learned  by  the  pro- 
gressive manufacturer  from  these  excellent  treatises  on  com- 
mercial accounting,  and  he  will  do  well  to  study  carefully 
the  principles  of  accounting,  as  the  information  gained  will 
be  of  great  assistance  in  devising  a  correct  cost  system. 

It   is   seldom   that   a  paper  on  cost  methods   is   presented 


THE    PURPOSES    OF    A    COST    SYSTEM  1 3 

to  an  engineering  society,.  Many  members  believe  that  such 
papers  have  no  place  in  the  records  of  the  society.  They 
do  not  consider  cost  accounting  a  technical  subject,  or  a 
part  of  their  profession.  They  consider  that  this  is  w^ork 
of  bookkeepers  and  not  engineers.  If,  by  chance,  a  paper 
on  this  subject  is  presented,  it  does  not  excite  general  interest 
and  the  intelligent  discussion  is  confined  to  a  comparatively 
few  members. 

In  the  technical  journals  every  small  improvement  in 
plant  equipment  is  fully  described  and  improved  methods 
are  discussed  in  detail,  v^hile  little  space  is  given  to  improve- 
ments in  cost  systems,  and  it  is  seldom  that  a  comprehensive 
article  on  this  subject  is  found. 

The  lack  of  information  in  the  technical  press  on  this  im- 
portant subject  is  due  entirely  to  the  lack  of  general  interest 
in  the  subject  on  the  part  of  engineers,  managers  and  owners. 
The  technical  press  is  very  much  like  the  modern  news- 
paper —  it  publishes  what  its  readers  want  —  that  which 
they  demand. 

W^HAT   CAN   BE  LEARNED  FROM   A   PROPER   COST  SYSTEM  ? 

Every  operation  of  the  plant  can  be  read  from  the  cost 
figures.  The  costs  day  by  day  represent  actual  work  — 
actual  progress  of  each  job  toward  completion.  In  a  proper 
system  these  costs  are  so  recorded  that  a  manager  or  his 
assistant  can  ascertain  from  the  office  what  is  taking  place 
in  the  plant.  He  sees  whether  or  not  a  rush  order  is  re- 
ceiving proper  attention,  and  knowing  the  approximate  total 
cost  for  direct  labor,  can  tell  whether  at  the  present  rate  the 
job  will  be  completed  in  the  promised  time.  He  can  tell 
whether  all  departments  are  proceeding  as  they  should  to 
make  the  many  parts  come  together  at  the  same  time  for  final 
assembly. 

With  his  knowledge  of  the  job  he  knows  the  department 
which  must  take  up  the  work  first,  and  approximately  how 
much  must  be  done  before  the  work  can  be  delivered  to  the 


14  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

next  department.  He  knows  how  much  prehminary  work 
can  be  done  by  the  second  department  to  enable  it  to  proceed 
rapidly  when  the  product  of  the  first  is  obtained. 

With  his  knowledge  of  the  work  itself  and  with  the  daily 
records  of  the  direct  labor  conveniently  recorded  by  shops 
and  trades  he  can  tell  exactly  the  progress  made  in  each  de- 
partment. 

Many  will  say  that  this  can  be  learned  from  the  shops  and 
that  the  shop  is  the  place  to  obtain  this  information.  The 
information  can  be  obtained  from  the  shops,  but  to  do  so 
the  job  must  be  followed  from  shop  to  shop  and  perhaps 
from  machine  to  machine.  Few  managers  have  the  time 
to  do  this.  In  their  rounds  through  the  shops  many  affairs 
occupy  their  attention  and  they  have  little  time  to  follow  a 
job  in  this  manner.  It  is  often  in  the  office  that  a  manager 
has  a  job  of  work  brought  to  his  attention  and  wishes  to 
know  what  has  been  accomplished  in  each  department.  To 
telephone  to  each  department  head  for  this  information  is 
unsatisfactory.  If  he  can  obtain  the  information  from  the 
cost  cards  he  is  in  a  position  to  study  the  job  as  a  whole  and 
plan  his  actions. 

By  means  of  the  cost  system  under  which  I  lately  operated, 
the  direct  labor  costs  are  accurately  recorded  and  so  arranged 
that  each  day  the  costs  by  shops  or  trades  can  quickly  be 
obtained.  Each  of  my  assistants  received  the  job-order 
cards  of  the  work  under  his  supervision  at  4  p.  m.  every 
day.  Many  of  these  cards  receive  but  superficial  examina- 
tion, but  those  for  important  work  receive  careful  scru- 
tiny. First,  the  totals  of  the  direct  labor  costs  are  known 
and  with  general  knowledge  of  the  progress  of  the  work  the 
efficiency  of  operation  is  measured.  The  estimated  cost  of 
each  job  is  given  on  the  card  and  it  is  therefore  known  how 
much  money  remains  of  the  direct  labor  estimate  with  which 
to  complete  the  work.  The  jobs  that  have  overrun  the  esti- 
mates, or  are  in  danger  of  overrunning,  are  picked  out  and  in- 
vestigated   and    the    reasons    for    this    condition    determined. 


THE    PURPOSES    OF    A    COST    SYSTEM  1 5 

This  brings  forth  better  supervision  on  the  part  of  foremen 
of  what  might  be  called  the  dangerous  jobs. 

The  progress  of  the  work  in  each  department  can  be  ap- 
proximately determined  and  departments  that  are  behind  can 
be  accelerated.  For  example,  in  a  large  pipe  job,  the  charges 
show  that  the  pipe  shop  has  made  material  progress  while 
the  foundry  has  done  little  or  nothing.  Before  the  work  can 
be  completed  the  flanges  and  fittings  must  be  cast  in  the 
foundry  and  rnachined  in  the  machine  shop.  Either  the  pipe 
shop  is  too  fast  or  the  foundry  is  slow.  A  note  is  made  of 
this  job  and  the  conditions  investigated  the  following  day. 
The  accuracy  of  charges  against  jobs  is  also  tested.  On  a 
number  of  jobs  the  assistant  knows  exactly  the  men  who 
worked  the  previous  day  and  with  this  knowledge  checks  the 
charges  made  against  the  job  order.  In  actual  practice  it 
was  found  necessary  each  day  to  issue  a  considerable  number 
of  memoranda  to  foremen  asking  for  explanations  or  giving 
suggestions  and  directions. 

It  has  been  found  convenient  to  go  over  the  job-order  cards 
after  the  usual  working  hours  when  this  can  be  done  undis- 
turbed, and  to  dictate  the  notes  regarding  the  work  to  a 
dictating  machine,  to  be  written  and  sent  out  the  following 
morning.  This  use  of  costs  gives  a  manager  and  his  as- 
sistants a  much  better  grasp  of  the  situation,  puts  the  man- 
ager in  closer  touch  with  the  work,  and  brings  each  day 
to  his  attention  important  facts  which  otherwise  might  es- 
cape him. 

The  notes  that  I  make  from  the  afternoon  scrutiny  of 
the  job-order  cards  have  been  of  great  value  in  planning  the 
following  day's  work.  Frequently  on  Sundays  or  at  night 
I  go  over  the  job-order  cards  of  the  important  work.  At  these 
times  I  am  undisturbed  and  devote  my  whole  attention  to 
a  study  of  conditions  as  shown  by  the  cost  records.  In 
these  days  of  competition  there  are  few  managers  who  do 
not  sometimes  find  it  necessary  to  study  the  operation  of 
the  plant  outside  of  working  hours.     At  these  times  the  cost 


l6  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

records  should  supply  the  necessary  information.  Accurate 
costs  properly  recorded  are  the  sign  boards  pointing  directly 
to  inefficient  methods  and  inefficient  service. 
^There  is  another  important  benefit  to  be  derived  from  this 
/•^se  of  costs.  The  working  force  soon  knows  that  the  his- 
tory of  each  department  is  recorded  by  the  costs,  and  that 
/  \each  day  the  story  is  told  to  the  responsible  head,  and  that 
any  dereliction  will  be  immediately  noted  and  corrective  meas- 
ures applied.  This  knowledge  brings  forth  better  supervision 
on  the  part  of  superintendents  and  foremen,  and  better  ef- 
forts on  the  part  of  workmen,  and  consequently  increases 
efficiency.  Every  manager  knows  that  when  the  cost  of  a 
job  is  watched  day  by  day  the  total  cost  will  be  much  less 
than  if  the  work  had  not  received  this  attention.  Nearly 
every  manager  has  at  some  time  watched  the  cost  of  a  job 
in  which  he  is  particularly  interested  and  he  knows  that  his 
watchfulness  has  brought  excellent  results.  Then,  why  is 
any  argument  needed  to  strengthen  the  plea  to  watch  all  costs 
in  the  same  manner? 

To  do  this  a  system  must  be  provided  which  presents  true 
costs  in  a  convenient  form  so  that  the  figures  may  be  readily 
analyzed. 

It  is  true  that  in  a  large  establishment  with  many  job 
orders  it  will  be  impossible  for  the  manager  to  go  over  the 
cards  for  each  job.  He  has  assistants  who  can  do  this,  and 
these  will  bring  to  his  attention  all  important  matters  and 
all  exceptions  which  they  are  unable  to  handle. 

While  the  above  described  daily  scrutiny  of  cost  by  job 
orders  refers  to  direct  labor  costs,  it  must  not  be  inferred 
that  the  material  charges  should  not  receive  attention.  The 
cost-of-work  cards  show  the  charges  for  labor,  material  and 
indirect  expenses.  These  are  recorded  by  months,  the  labor 
being  taken  from  the  job-order  cards,  the  material  from  the 
storekeepers'  bills,  and  the  indirect  from  the  expense-dis- 
tribution sheet.  These  should  be  scrutinized  not  less  than 
once  a  month. 

I  have  found  these  uses  of  costs  to  be  of  the  greatest  as- 


THE    PURPOSES    OF    A    COST    SYSTEM  1 7 

sistance  in  an  organization  employing  1,500  to  2,000  men,  dis- 
tributed in  a  number  of  shops.  There  is  Httle  doubt  that 
similar  use  will  be  of  benefit  in  a  smaller  plant. 

MANAGER  SCRUTINIZES  EACH   MONTH  ALL  INDIRECT   CHARGES. 

With  a  proper  system  of  costs  there  will  be  presented  to 
the  manager  each  month  a  complete  analysis  of  all  of  the 
indirect  charges.  This  will  show  for  each  shop  the  indirect 
charges  under  appropriate  heads  and  the  total  shop  expense. 
The  general  expenses  will  also  be  shown  in  a  similar  manner. 
The  productive  labor  in  each  shop  should  also  be  shown  and 
the  proportion  of  each  expense  to  productive  labor  given. 
The  distribution  of  the  expense  burden  to  the  output  should 
also  be  given.  By  means  of  parallel  columns,  or  better,  by 
means  of  curves,  each  of  the  various  factors  should  be  plotted 
by  months,  so  that  the  manager  can  see  at  a  glance  whether 
the  tendency  of  each  expense  is  up  or  down.  With  this  in- 
formation the  manager  can  see  exactly  where  the  money 
for  the  expense  burden  goes.  He  will  note  that  one  item 
of  expense  is  very  large,  but  he  knows  the  reason.  There 
has  been  a  breakdown  which  involved  a  large  expenditure  for 
repairs.  He  notes  another  item  which  is  higher  than  usual, 
and  for  which  he  does  not  know  the  reason.  He  checks 
this  item  for  a  detail  of  labor  and  material.  Thus,  he  goes 
through  the  monthly  expense  reports,  noting  exceptions  for 
further  details.  These  details  are  prepared  for  him  and 
unless  they  show  to  his  satisfaction  that  the  extra  expendi- 
ture is  warranted  he  is  in  a  position  to  take  up  the  question 
with  the  department  head  and  will  require  satisfactory  ex- 
planation or  apply  corrective  measures. 

He  can  at  various  times  take  up  the  expenses  shop  by 
shop,  item  by  item,  and  have  a  complete  analysis  and  detail 
study  made  to  see  if  the  expense  for  this  shop  can  be  re- 
duced without  reducing  the  output  or  without  injury  to  the 
plant  equipment.  This  is  not  only  for  the  purpose  of  stop- 
ping leaks,  but  also  for  devising  better  methods  or  better  ap- 
pliances.    In  this,  as  in  all  other  work,  it  will  be  found  thaC 


l8  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

when  it  is  studied  in  detail  and  systematized  the  expenditures 
can  be  materially  reduced  without  injury  to  the  plant  or 
without  reducing  the  output.  By  such  a  system  of  costs 
the  manager  is  not  only  able  to  see  clearly  the  operation 
of  the  plant,  but  the  leaks  and  deficiencies  stand  out  and  he 
can  apply  the  remedy.  He  is  armed  with  absolute  knowledge 
and  does  not  have  to  guess;  when  he  calls  for  an  explana- 
tion from  a  subordinate  it  will  be  useless  for  the  subordinate 
to  attempt  to  evade  or  bluff,  for  now  the  manager  knows. 

y 

^  MONTHLY    BALANCE    DESIRABLE. 

Very  few  manufacturing  establishments  and  practically  no 
repair  shops  make  a  monthly  balance.  There  is  no  neces- 
sity for  waiting  until  the  end  of  the  year  to  determine  if  the 
concern  is  making  or  losing  money.  This  can  and  should 
be  known  at  the  end  of  each  month.  A  proper  cost  and 
accounting  system  shows  this  and  there  can  be  no  question 
that  the  concern  with  this  information  is  in  a  far  stronger 
position  than  one  without  it.  To  obtain  a  monthly  balance 
in  an  establishment  like  a  shipyard,  where  large  contracts 
are  taken  which  require  several  years  to  complete,  it  is  neces- 
sary that  an  estimate  be  made  each  month  of  the  value  of  the 
output  on  such  contracts.  Practically  all  contracts  of  this 
kind  are  paid  for  as  the  work  progresses,  as  no  firm  cares 
to  finance  a  five-million-dollar  contract.  This  requires  that 
from  time  to  time  careful  estimates,  based  on  the  total  con- 
tract price,  shall  be  made  on  the  value  of  the  work  accom- 
plished, in  order  that  payments  may  be  obtained.  These 
estimates  are  carefully  checked  by  the  purchaser  and  are  us- 
ually conservative.  The  same  system  may  be  employed  to 
show  each  month  the  value  of  the  work  accomplished  on  each 
large  contract. 

The  monthly  balance  is  another  case  of  a  proper  system 
giving  information  that  is  well  worth  while,  information 
which  prevents  the  manager  from  acting  in  the  dark.  It  is 
also  of  value  to  the  owner  or  the  board  of  directors  in  a 
stock  company.      Sometimes  owners  or  directors  are  in  igno- 


THE    PURPOSES    OF    A    COST    SYSTEM  IQ 

ranee  of  the  actual  conditions  and  believe  that  large  divi- 
dends are  being  earned  when  ^uch  is  not  the  case.  This 
condition  is  not  unusual  when  a  concern  is  principally  en- 
gaged in  executing  large  contracts  which  require  several  years 
to  complete.  A  manager  may  obtain  at  low  prices  a  num- 
ber of  such  orders  and  the  concern  has  every  appearance  of 
prosperity,  and  the  owner  is  led  to  believe  that  large  profits 
will  be  secured  when  the  contracts  are  completed.  Without 
an  accurate  cost  system  there  is  no  way  by  which  the  esti- 
mates made  by  the  manager  can  be  checked,  other  than  to 
engage  an  expert  to  go  over  the  work  in  detail  and  estimate 
the  value,  and  compare  this  with  the  expenditures ;  but  the 
owner  has  no  reason  to  consider  such  action  necessary.  When 
the  work  is  completed,  instead  of  profits  there  are  enormous 
losses.  This  case  is  by  no  means  an  extreme  one  and  at 
least  one  large  manufacturer  can  testify  to  the  correctness  of 
the  statement. 

Purchasers  of  large  properties  may  be  deceived  in  the 
same  manner  and  under  the  veil  of  apparent  prosperity  losing 
establishments  are  sometimes  sold  at  very  advantageous 
terms.  No  doubt  some  of  my  readers  have  better  knowl- 
edge than  I  of  the  losses  due  to  buying  under  these  con- 
ditions. These  regret  that  accurate  cost  keeping  and  account- 
ing were  not  more  general,  or  at  least  were  not  employed  in 
these  plants,  for  such  operations  would  have  then  been  im- 
possible. 

DIVIDENDS    THAT    ARE    PAID    FROM    CAPITAL   AND    NOT    FROM 

PROFITS. 

A  proper  cost  system  shows  the  actual  profits,  but  fre- 
quently with  the  systems  in  use  the  records  show  profits 
which  are  not  real.  In  many  concerns,  particularly  the  small 
establishments,  in  arriving  at  costs  no  account  is  taken  of 
depreciation,  or  if  it  is  considered,  the  allowance  made  is 
inadequate.  In  these  cases  the  profits  shown  are  apparent 
and  not  real.  The  owners,  however,  do  not  realize  that  the 
dividends  which  they  receive  are  at  least  partly  derived  from 


20  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

the  principal  and  not  from  profits.  This  subject  will  be  dis- 
cussed in  more  detail  in  a  subsequent  chapter. 

Few  concerns  know  whether  or  not  every  line  they  make 
and  sell  is  a  money  maker.  They  cannot  know  with  their 
present  cost  system.  Is  this  good  business?  Surely  not! 
Many,  however,  depend  on  the  cost  system  to  show  a  profit 
or  loss  at  the  end  of  the  year,  and  are  satisfied  if  a  sub- 
stantial profit  is  shown.  These  are  neglecting  their  oppor- 
tunities. Oftentimes  one  product  should  show  a  substantial 
loss  which  is  made  up  by  large  profits  on  the  others.  A 
proper  cost  system  will  show  the  profits  on  each  line.  If 
the  losses  on  the  losing  line  cannot  be  turned 'into  a  profit  by 
improved  efficiency,  then  that  line  should  be  abandoned  and 
all  energy  concentrated  on  the  profitable  lines. 

In  some  foundries  costs  are  kept,  and  selling  prices  are 
fixed  on  a  tonnage  basis.  The  costs  of  large  simple  castings 
are  averaged  with  those  of  the  small  difficult  ones.  It  is 
hardly  necessary  to  point  out  that  the  selling  prices  of  the 
large  castings  are  too  high  while  the  small  are  too  low.  If 
it  is  known  to  buyers  that  costs  are  kept  in  this  way  orders 
for  small  castings  will  be  plentiful. 

I  know  of  one  large  concern  that  places  its  orders  for 
castings  in  this  manner.  The  small  and  medium-sized  cast- 
ings go  to  the  concern  where  costs  are  averaged,  while  all 
of  the  larger  castings  go  to  another  where  costs  are  properly 
kept. 

I  recently  visited  a  shop  that  used  a  number  of  small  steel 
castings  weighing  less  than  a  pound  each,  and  learned  that 
they  were  obtained  at  ten  cents  a  pound.  The  foundry  that 
made  these  is  a  small  plant  using  the  Tropenas  process.  The 
cost  records  were  of  no  value  in  fixing  selling  prices,  and  many 
orders  were  taken  at  an  actual  loss.  This  steel  plant  went 
out  of  business. 


/ 


THE    PURPOSES    OF    A    COST    SYSTEM  21 

IS    EVERY   DEPARTMENT    OF   THE    PLANT   A    MONEY-MAKER? 

A  large  concern  usually  consists  of  many  departments. 
Is  each  of  these  a  money-maker?  Is  each  shop  efficient? 
If  not,  can  it  be  made  efficient?  These  are  important  ques- 
tions and  every  capable  manager  wants  satisfactory  answers, 
and  he  should  have  them  to  manage  the  establishment  prop- 
erly. Let  managers  ask  these  questions,  and  few  will  re- 
ceive satisfactory  replies,  although  a  proper  cost  system 
provides  the  data. 

In  some  of  the  large  establishments  with  numerous  shops 
the  expense  burden  is  averaged  and  applied  on  the  basis  of 
productive  labor  —  notwithstanding  the  fact  that  in  one  shop 
the  shop  expense  percentage  is  nearly  a  hundred  while  in 
another  it  is  less  than  twenty-five.  Frequently  such  estab- 
lishments are  called  on  to  bid  for  work  which  is  almost  exclu- 
sively confined  to  the  shops  where  the  expense  is  low,  and 
by  using  the  higher  average  rate  the  bids  are  high  and  the 
work  goes  to  other  establishments  where  costs  are  more  ac- 
curately determined.  Thus  profitable  work  is  often  lost. 
Sometimes  the  establishment  which  is  known  to  be  better 
equipped  and  more  efficient  loses  in  this  way  to  the  poorly- 
equipped,  inefficient  shop,  and  the  latter  makes  money.  I 
know  of  at  least  one  establishment  which  lost  so  many  profita- 
ble repair  jobs  in  this  manner  as  to  cause  general  comment, 
yet  apparently  the  real  cause  was  not  known  to  those  in  au- 
thority. 

WHAT    IS    GOOD    JUDGMENT? 

A  great  deal  is  heard  of  good  judgment,  and  men  who 
possess  this  quality  command  high  salaries.  Often  an  es- 
tablishment which  has  secured  such  a  man  depends  almost 
entirely  on  his  "  good  judgment "  for  better  results,  and 
it  is  considered  that  with  this  he  can  overcome  the  lack  of 
organization,  cost  system,  or  even  of  plant  equipment. 

A  good  mechanic-  to  produce  the  best  work  quickly  must 
have  good   tools   with   which   to   work.     If   he   is   not   given 


22  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

these  a  less  efficient  man  with  better  tools  can  produce  better 
results.  The  same  applies  to  the  manager.  A  manager  with 
good  judgment  is  extremely  valuable,  but  he  must  have  the 
tools  with  which  to  work.  If  he  does  not  obtain  them  a 
man  of  less  ability  with  better  organization  and  better  equip- 
ment will  outdistance  him. 

Good  judgment  is  the  application  of  knowledge  gained 
by  experience.  This  is  derived  partly  by  direct  observa- 
tion and  partly  from  statistics  compiled  by  others  which 
have  been  digested  and  the  salient  points  retained.  If  the 
manager  is  really  a  man  of  ''  good  judgment  "  he  will  pro- 
vide himself  with  the  organization  and  the  system  which  will 
furnish  him  with  correct  information.  An  accurate  cost  sys- 
tem is  an  essential  part  of  such  an  organization. 


CHAPTER  III 
The  Various  Elements  of  Cost 

It  is  well  to  admit,  before  going  into  the  subject  in  detail, 
that  from  the  point  of  view  of  the  manager  it  is  impracticable 
to  obtain  costs  that  are  scientifically  accurate.  To  obtain 
such  costs  will  "recjuire  machinery  so  complex  that  the  real 
reason  for  the  existence  of  the  factory,  that  is,  the  produc- 
tion of  work  at  a  cost  which  will  permit  it  to  be  sold  at  a 
profit,  may  be  lost  sight  of  in  striving  for  scientifically  ac- 
curate records. 

In  a  few  words,  the  purpose  of  costs  is  twofold :  The 
first  is  to  furnish  the  cost  of  the  products  so  that  the  selling 
price  can  be  fixed,  or  if  the  selling  price  is  fixed  by  competi- 
tion, to  determine  if  the  product  can  be  manufactured  at  a 
profit.  The  second  is  for  the  benefit  of  the  manager,  to  show 
him  where  economies  may  be  eflfected. 

An  information  which  is  useful  for  these  two  purposes  is 
valuable  and  should  be  obtained  if  this  can  be  done  without 
excessive  cost  or  disadvantages  which  outweigh  the  advan- 
tages. Reports  and  data  which  do  not  serve  either  of  these 
ends  are  useless,  an  unnecessary  expense,  and  may  by  their 
complication  and  multiplicity  of  detail  obscure  the  real  ob- 
jects sought. 

In  the  present  day,  with  the  systems  of  shop  management 
which  are  most  generally  used,  it  is  not  possible  to  obtain 
costs  with  the  degree  of  accuracy  that  is  believed  neces- 
sary by  many  progressive  managers,  but  with  advance- 
ment in  shop  management  there  wiU  be  corresponding  ad- 
vancement in  the  degree  of  accuracy  of  costs.  I  believe  that 
the  day  is  not  far  distant  when  scientific  shop  management 
will   be   almost   universal   and   when   that   day   comes,    costs 

23 


24  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

which  are  approximately  scientifically  correct  will  not  only 
be  possible,  but  the  rule. 

In  the  meantime  great  improvement  can  be  made  in  ex- 
isting methods,  and  it  is  my  purpose  to  attempt  to  point  out 
defects  in  methods  frequently  followed,  and  to  attempt  to 
describe  methods  which  will  give  more  accurate  results,  and  at 
the  same  time  not  require  an  undue  amount  of  clerical  labor. 
The  most  important  object  sought,  however,  is  to  arouse  in- 
terest among  engineers,  owners  and  managers  in  the  im- 
portance of  improvement  in  the  accuracy  of  cost  records. 

Production  costs  consist  of  direct  labor,  direct  material, 
and  the  indirect  costs.  It  is  difficult  to  give  a  general,  but 
rigid,  definition  of  these  elements,  but  in  each  system  at  least 
there  must  be  a  rigid  definition  if  accuracy  is  to  be  attained. 

DIRECT    LABOR. 

Direct  labor  is  often  called  productive  labor,  and  is  de- 
fined as  all  labor  which  is  employed  directly  in  the  produc- 
tion of  the  output,  as  distinguished  from  labor  indirectly 
employed  on  output.  A  machinist  running  a  lathe  turning 
a  crank  shaft  for  an  engine  under  construction  is  clearly 
performing  productive  or  direct  labor,  while  the  engine 
tender  in  the  power  plant  is  classed  as  performing  un- 
productive or  indirect  labor.  There  is,  however,  much 
labor  which  is  not  so  clearly  defined.  There  is  labor 
which  is  directly  employed  on  output,  but  as  it  is  employed 
for  varying  periods  during  the  day  on  a  large  number  of 
dififerent  jobs,  each  of  which  receives  but  a  few  minutes 
of  time,  it  is  impracticable  to  charge  the  time  direct  to  each 
job.  In  a  large  establishment  many  cases  of  this  kind  can 
be  found,  for  example:  A  general  helper  or  laborer  em- 
ployed in  a  machine  shop  or  foundry  who  is  called  on  to 
assist  in  many  jobs  during  the  day;  a  machine  hand  in  a 
jobbing  wood-working  shop  or  pattern  shop  running  several 
machines,  may  work  on  fifty  jobs  during  the  day;  a  man 
employed  as  a  "  move  man  "  to  move  work  from  one  machine 
to  another,  etc.    With  the  shop  organization  that  is  almost  uni- 


THE    VARIOUS    ELEMENTS    OF    COST  25 

versal  it  is  impossible  to  correctly  charge  these  men  directly 
to  the  work  on  which  they  are  engaged.  Any  attempt  to  do 
so  will  usually  result  in  the  large  jobs  getting  nearly  all  the 
charges  while  the  many  small  jobs  get  none. 

In  many  shops  where  some  attention  is  given  to  shop- 
expense  costs,  and  a  more  or  less  blind  effort  is  made  to  re- 
duce these  expenses,  the  result  will  be  that  the  time  of  such 
men  is  divided  up  by  the  foreman  and  charged  direct  to  a  few 
large  jobs.  It  is  far  better  to  recognize  the  fact  that  this 
miscellaneous  labor  engaged  directly  on  output  cannot  under 
present  conditions  be  accurately  charged  to  the  output,  and 
should  be  charged  as  indirect  labor. 

Frequently  some  of  the  supervisory  force  are  engaged  ex- 
clusively on  one  large  job,  and  there  are  many  arguments  for 
charging  such  men  direct  to  the  job.  In  fact,  I  know  of  very 
few  who  advocate  charging  such  men  otherwise.  For  ex- 
ample, one  sub- foreman  has  entire  charge  under  the  foreman 
of  the  erection  of  a  large  engine  on  the  erecting  slab;  or 
an  assistant  foreman,  himself  with  an  assistant,  has  charge 
of  retubing  the  boilers  of  a  large  ship.  As  these  are  ex- 
clusively engaged  on  the  one  job,  at  first  thought  it  would 
seem  proper  to  charge  these  direct  to  the  work  which  has  the 
benefit  of  their  services,  and  this  is  the  usual  practice. 

On  the  other  hand,  when  a  sub- foreman  is  engaged  at  the 
same  time  in  the  supervision  of  a  number  of  jobs,  his  time 
is  charged  to  the  indirect  order  for  supervision.  Under  this 
system  the  large  jobs  mentioned  not  only  pay  for  their  own 
supervision,  but  also  help  to  pay  for  the  supervision  of  other 
work  where  the  supervisory  force  is  charged  to  an  expense 
order  and  pro-rated. 

Another  important  objection  to  this  method  is  that  it  im- 
pairs the  accuracy  of  the  records.  There  is  an  order  num- 
ber in  the  expense  accounts  for  the  shop  supervision,  and  the 
manager  desires  each  month  to  know  exactly  the  cost  of 
this  supervision.  By  the  usual  method  this  cannot  be  told, 
and  the  comparisons  made  of  the  monthly  expenditures  are 
of   little   value,    as   one   month   all   of   the   shop   supervisory 


26  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

force  is  charged  to  the  supervision  number,  while  the  next 
month  much  of  this  cost  may  be  hidden  in  the  direct-labor 
costs.  The  supervisory  force  should  never  be  charged  direct 
to  a  job,  but  should  always  be  charged  to  the  supervision 
number.  This,  however,  does  not  apply  to  the  supervisory 
force  of  an  erection  gang  away  from  the  plant,  employed  ex- 
clusively on  one  job.  In  this  case  the  supervisory  force  is 
charged  direct  to  the  job  and  this  job  does  not  receive  any 
part  of  the  expense  of  shop  supervision. 

This  not  only  refers  to  foremen,  assistant  foremen,  gang 
bosses,  etc.,  who  are  regularly  classed  as  supervisory,  but 
also  to  mechanics  who  are  acting  in  a  supervisory  capacity 
and  who  are  in  the  shop  termed  ''  straw  bosses."  This  method 
increases  the  shop-expense  charges,  and  on  this  account  is 
objectionable  to  rnany,  but  if  cost  records  are  to  be  used  to 
their  full  value,  the  system  must  be  as  rigid  as  possible,  and 
the  costs  which  are  compared  must  always  be  for  the  same 
object  or  the  same  service. 

Under  these  conditions  it  is  necessary  to  define  direct  labor 
as  the  labor  employed  in  the  production  of  output,  which  it 
is  practicable  to  charge  direct  to  production  orders,  and  does 
not  include  labor  which,  under  the  cost  system  used,  should  be 
charged  to  supervision,  miscellaneous  labor,  or  other  over- 
head orders. 

IMPORTANCE    OF    ACCURACY    IN    OBTAINING    "  DIRECT-LABOR 

CHARGES." 

It  is  of  the  greatest  importance  to  secure  accurate  direct- 
labor  charges.  This  is  true  not  only  on  account  of  the  im- 
portance of  these  charges  in  themselves,  but  in  the  great  ma- 
jority of  the  shops  the  overhead  charges  are  pro-rated  to 
the  different  jobs  on  the  basis  of  direct  labor,  and  inaccuracies 
in  these  charges  vitiate  the  accuracy  of  the  distribution  of 
the  burden.  In  the  case  cited  above,  relative  to  charging  cer- 
tain supervision  direct  to  production  orders,  not  only  do 
these  orders  pay  for  supervision  of  other  work,  but  by  in- 
creasing the   direct-labor   charge   the   order   is   made  to   pay 


THE    VARIOUS    ELEMENTS    OF    COST  2/ 

for  more  than  its  share  of  all  of  the  overhead  charges.  It 
is  generally  conceded  that  the  best  means  of  securing  cor- 
rect labor  charges  is  by  means  of  the  individual  service  card, 
or  time  ticket,  as  it  is  sometimes  called.  A  separate  card 
is  used  for  each  job  on  which  a  man  works.  In  the  best  or- 
ganization these  cards  are  made  for  the  workman,  and  he  has 
only  to  enter  the  time  he  starts  and  stops  a  job,  and  in  some 
shops  this  is  done  by  means  of  clocks.  The  total  time 
charged  to  jobs  must  equal  the  payroll  time  of  the  employees. 

DIRECT    MATERIAL. 

Direct  material  has  been  defined  as  the  material  that  en- 
ters in  and  forms  a  part  of  the  product  manufactured.  This 
definition  is  not  exact.  Like  direct  labor  there  is  some  ma- 
terial that  enters  into  the  product  that  cannot  be  charged  as 
direct  material,  but  must  be  charged  indirectly :  glue  used  in 
a  joiner  shop  or  pattern  shop;  a  few  nails  or  screws  used  on 
a  repair  job;  a  small  amount  of  solder  on  sheet-metal 
work;  a  few  cotter  pins  on  a  job  in  the  machine  shop; 
the  red  lead  or  litharge  used  in  making  joints;  the  material 
used  with  the  oxy-acetylene  welding  plant,  and  many  other 
similar  items.  On  account  of  the  difficulty  of  measuring 
the  quantity  used  of  some  of  this  material  and  the  small 
amounts  used  of  other  classes,  it  is  impracticable  to  charge 
these  direct,  and  they  must  be  included  in  the  indirect  charges. 
Direct  material  must,  therefore,  be  defined  as  the  material 
which  enters  in  the  product  that  it  is  practicable  to  charge 
direct. 

Much  more  care  than  is  usually  the  case  should  be  given 
to  the  custody  of  material  and  to  the  charges  for  material 
used.  Many  managers  are  very  particular  regarding  the 
charges  for  labor,  while  they  give  but  little  attention  to  the 
charges  for  material.  They  insist  that  the  total  of  the  pay- 
roll must  balance  with  the  labor  charged  to  the  various  or- 
ders, but  they  make  no  effort  to  balance  the  material  charges. 
In  many  establishments  much  material  is  stored  in  the  shop, 
and  in  some  cases  is   free  to  all.     When  this  is  the  case  it 


28  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

is  inevitable  that  material  will  be  used  and  not  charged  to 
the  job.  'Under  these  conditions  there  is  also  considerable 
waste,  due  to  loss  and  pilfering.  Scrap  material  which  has 
been  left  over  from  a  previous  job  is  frequently  used  without 
charge  or  credit.  Except  in  strictly  manufacturing  estab- 
lishments it  is  rare  that  the  material  actually  used  will  check 
with  the  charges  made. 

There  should  be  strict  accountability  for  all  material,  and 
this  cannot  be  accomplished  without  a  rigid  store-keeping 
system.  To  store  all  material,  however,  in  a  storehouse  and 
send  there  every  time  minor  miscellaneous  material  is  re- 
quired, is  a  mistake.  Not  only  will  such  a  system  cause 
much  costly  delay,  but  it  will  also  force  a  foreman  to  acquire 
surreptitiously  a  small  stock  in  the  shop  not  on  charge  on  the 
books. 

In  addition  to  the  storehouse  there  should  be  established 
in  each  shop  a  well-arranged  stock  room  in  which  is  kept  a 
small  stock  of  miscellaneous  minor  materials  required  to  meet 
immediate  demands  of  the  shop.  In  the  small  shops  this 
can  be  maintained  in  connection  with  the  tool  room.  There 
should,  however,  be  rigid  accountability  for  this  material. 
Regular  stock  cards  should  be  maintained  and  the  stock 
should  be  frequently  inventoried.  All  material  issued  for  a 
job  which  is  not  used  should  be  returned  to  the  store  and  the 
job  credited.  No  material  should  be  allowed  in  the  shop  un- 
less it  has  been  drawn  for  work  under  way. 

I  have  no  doubt  that  eventually  in  all  but  small  jobbing 
shops  the  bill  of  material  required  for  every  job  that  can  be 
charged  direct  will  be  prepared  in  the  office  when  the  work 
is  planned,  and  ordered  from  the  store  before  the  work  is 
begun.  This  is  now  done  in  some  establishments,  but  is  by 
*no  means  general.  There  is  much  that  can  be  done  to  in- 
sure correct  material  charges,  and  if  managers  will  give  this 
subject  one-tenth  of  the  attention  that  they  give  to  labor, 
large  savings  will  be  effected,  and  the  cost  records  will  be 
more  accurate. 


THE    VARIOUS    ELEMENTS    OF    COST  2g 

INDIRECT    COST. 

The  indirect  costs  are  generally  called  "  expense  charges," 
"  expense  burden,"  or  "  overhead  expenses."  These  terms 
are  unfortunate,  as  they  give  the  idea  that  they  cover  the 
cost  of  the  administration  and  upkeep  of  the  establishment, 
and  nothing  else.  P^rom  the  definitions  of  direct  labor  and 
direct  material,  it  can  be  seen  that  both  labor  and  material 
employed  directly  in  product  are  included  in  the  indirect 
costs,  although  not  in  any  way  a  part  of  the  expenses  of  the 
establishment. 

In  a  foundry  doing  jobbing  work,  for  example,  it  is  an 
impossibility  to  accurately  charge  the  helpers  directly  to  the 
work,  and  these  are  usually  charged  to  the  indirect  order  for 
miscellaneous  labor,  yet  they  are  engaged  entirely  on  produc- 
tive work.  The  sooner  managers  and  others  get  away  from 
the  idea  that  the  percentage  of  indirect  costs  to  the  direct 
labor  is  a  measure  of  the  efficiency  of  the  establishment,  the 
quicker  will  there  be  obtained  accurate  cost  records,  and  what 
is  still  more  important,  the  quicker  shall  we  obtain  increased 
efficiency.  The  measure  of  efficiency  of  an  establishment  is 
the  total  cost  of  the  product,  not  a  part  of  the  cost,  and  the 
indirect  charges  are  but  a  part  of  the  costs. 

Indirect  costs  may  be  defined  as  the  element  of  the  total 
factory  cost  of  the  product  which  it  is  not  practicable  to  charge 
as  either  direct  labor  or  direct  material. 

TOTAL    FACTORY    COST. 

The  sum  of  the  direct  labor,  direct  material,  and  indirect 
cost  is  the  total  factory  cost.  To  obtain  the  total  cost  there 
must  be  added  to  the  factory  cost  the  selling  expense.  The 
selling  cost  should  be  kept  entirely  separate  from  the  factory 
cost  in  order  that  the  efficiency  of  both  the  factory  and  the  sales 
department  may  be  accurately  determined.  Not  only  should 
the  sales  department  be  charged  with  the  expense  of  adver- 
tising, salesmen,  etc.,  but  this  department  should  bear  its 
proper   proportion   of   the   general   expenses,    and   should   be 


30  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

charged  with  the  work  done  by  the  estimating  department  for 
the  benefit  of  sales. 

ELEMENTS    OF    THE    INDIRECT    COSTS. 

The  principal  elements  of  the  indirect  costs  are :  Ex- 
penses of  administration;  miscellaneous  labor  and  material 
which  it  is  impracticable  to  charge  direct  to  product;  interest 
on  money  invested  and  rent;  depreciation,  both  from  age  and 
use;  upkeep  of  plant;  taxes;  insurance,  fire,  accident  and  cas- 
ualty; heat,  light  and  power. 

Some  of  these  expenses  are  well  understood  and  require 
no  explanation,  but  others  are  not  understood  in  the  average 
establishment  and  before  accurate  costs  can  be  obtained  all 
must  be  understood  and  their  importance  realized. 

DEPRECIATION. 

It  cannot  be  considered  strange  that  little  is  known  in  the 
average  shop  regarding  depreciation  when  there  is  so  much 
ignorance  regarding  this  element  of  cost  in  quarters  where  one 
would  expect  to  find  knowledge. 

In  many  courts  throughout  the  country  it  has  been  decided 
that  depreciation  is  not  an  element  of  cost  and  should  not  be 
charged  against  income.  Hatfield  quotes  a  decision  in  a 
California  court  in  which  the  judge  decided  that  a  charge  of 
depreciation  against  income  was  "all  wrong"  and  ''not  to 
be  tolerated  for  a  moment."  Hatfield  also  states  that  some 
years  ago  the  Supreme  Court  of  the  United  States  held,  re- 
garding depreciation :  "  We  are  clearly  of  the  opinion  that  it 
is  not  a  proper  charge.  Only  such  expenditures  as  are  actu- 
ally made  can  with  any  propriety  be  claimed  as  a  deduction 
from  earnings."  On  the  other  hand,  the  Statutes  of  Ger- 
many, France,  Belgium,  Switzerland  and  Austria  require  that 
depreciation  must  be  charged  before  profits  can  be  paid.  The 
courts  of  England  have  also  almost  always  held  that  deprecia- 
tion must  be  considered,  and  this  has  been  the  ruling  in  many 
states  in  this  country.  The  most  important  recent  ruling  is 
that  of  the  Interstate  Commerce  Commission  that  an  allow- 


THE    VARIOUS    ELEMENTS    OF    COST  3 1 

ance  must  be  made  for  the  depreciation  of  the  equipment  of 
raihoads. 

All  expert  accountants  are  "unanimous  that  depreciation 
must  be  charged  to  output  and  there  is  little  doubt  that  any 
owner  who  will  give  the  subject  serious  consideration  will 
reach  the  same  conclusion. 

Perhaps  one  of  the  best  examples  of  depreciation  is  that  of 
a  valuable  patent,  for  which  a  large  sum  of  money  has  been 
paid.  It  is  known  that  this  has  but  a  certain  number  of  years 
to  run,  and  that  each  year  its  value  becomes  less.  A  certain 
proportion  of  the  money  paid  for  the  patent  must  be  written 
off  each  year  and  this  must  be  charged  to  the  product  which 
is  manufactured  under  the  patent. 

This  is  elementary  and  is  understood  even  by  those  who  do 
not  consider  depreciation  of  buildings  and  plant  equipment  as 
a  part  of  the  cost.  Oftentimes  expensive  plant  equipment 
becomes  obsolete  and  must  be  discarded  in  much  less  time 
than  the  life  of  a  patent,  and  still  many  owners  do  not  con- 
sider that  the  cost  of  such  equipment  should  be  charged  to 
the  work  produced  during  the  life  of  the  machine. 

There  are  two  kinds  of  depreciation,  one,  the  gradual  wear- 
ing out  due  to  age,  which  cannot  be  remedied  by  repair,  and 
the  other  is  due  to  machines  or  appliances  becoming  obsolete. 

In  some  classes  of  equipment  the  depreciation  by  wear  is 
the  more  important,  while  in  other  classes  used  for  work  in 
which  the  process  of  manufacture  is  rapidly  changing  and  in 
which  an  expensive  machine  may  be  out  of  date  and  discarded 
in  a  few  years,  the  depreciation  by  obsolescence  is  the  more 
important. 

Some  expert  accountants  attempt  to  keep  these  two  kinds 
of  depreciation  separated,  but  as  both  can  only  be  approxi- 
mately estimated  there  does  not  appear  to  be  any  advantages 
gained  by  this  separation  and  it  adds  to  the  complication  of 
the  accounts. 


32  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


HOW    IS    DEPRECIATION    DETERMINED: 

Depreciation  can  only  be  determined  by  estimating  the  use- 
ful life  of  the  building  or  machine  and  its  scrap  value  at  the 
end  of  the  period,  and  spreading  the  difference  between  cost 
and  scrap  value  over  the  period  of  life. 

The  life  of  a  building  or  equipment  depends  principally 
upon  its  character  and  use.  Some  buildings,  for  example  a 
stone  storehouse,  depreciate  very  slowly  —  probably  not 
more  than  2  per  cent,  a  year,  while  others  depreciate  very 
rapidly.  A  wooden  blacksmith  shop  or  foundry  which  is 
subject  to  smoke,  heat,  gases,  etc.,  depreciates  very  rapidly. 
A  building  in  which  rapidly  revolving  shafting  is  employed, 
or  machines  operating  with  considerable  shock,  as  a  number 
of  drop- forge  hammers,  also  depreciates  rapidly  and  for  such 
a  yearly  depreciation  of  from  4  per  cent,  to  8  per  cent,  should 
be  allowed. 

Machinery  depreciates  more  rapidly  than  buildings  and 
some  classes  much  more  than  others.  This  is  true  of  depre- 
ciation by  use,  but  greater  differences  are  found  in  different 
lines  of  manufacture  due  to  advances  in  the  methods  of  manu- 
facture. In  some  lines  the  changes  in  methods  are  not  radical 
and  are  comparatively  few  and  the  life  of  a  heavy  machine 
tool  can  conservatively  be  considered  as  15  to  20  years.  In 
other  lines  there  are  radical  changes  due  to  new  inventions, 
and  these  may  be  frequent  and  it  is  not  safe  to  consider  the 
life  of  the  machine  as  greater  than  five  years. 

Various  estimates  of  experts  are  available  regarding  the 
rates  of  depreciation;  perhaps  those  given  by  Dicksee  and 
Tiffany  serve  as  the  best  rough  guide,  but  the  average  rates 
recommended  by  the  commission  of  the  National  Machine 
Tool  Builders'  Association  are,  for  the  manufacturer,  more 
conservative.  These  are  as  follows:  10  per  cent,  on  ma- 
chinery, 5  per  cent,  on  frame  buildings,  and  3  per  cent,  on 
brick  buildings.  These  rates  are  for  favorable  conditions, 
and  apply  to  the  total  original  value  and  not  to  a  decreasing 
value. 


THE    VARIOUS    ELEMENTS    OF    COST  33 

However,  no  rates  should  be  accepted  and  used  without 
full  investigation  of  the  conditions  of  the  equipment  under 
consideration.  The  Interstate  Commerce  Commission  has  re- 
fused to  promulgate  standard  rates  of  depreciation,  stating 
that  "  Conditions  under  which  equipment  is  used  vary  so 
greatly  that  no  uniform  rate  of  depreciation  for  all  roads 
could  reasonably  be  determined.  The  proper  rate  will,  of 
course,  vary  inversely  with  the  life  of  the  property  to  which 
it  pertains,  and  its  determination  must  take  into  consideration 
whatever  affects  the  life  of  the  property." 

Each  case  must  be  considered  on  its  merits,  and  the  esti- 
mates should  be  made  by  one  of  experience  and  judgment 
who  knows  all  the  conditions;  but  it  is  wise  to  remember 
that  it  is  far  better  to  err  by  over-estimating  than  by  under- 
estimating the  depreciation. 

DETERMINATION    OF    THE    DEPRECIATION    TO    BE    CHARGED    OFF 

EACH   YEAR. 

There  are  numerous  methods  offered  by  accountants  for 
charging  off  the  depreciation  yearly.  It  is  considered  that 
from  the  standpoint  of  the  manager  or  engineer  only  two 
need  be  presented. 

The  first  and  simplest,  and  the  one  most  commonly  used, 
is  to  divide  the  difference  between  the  actual  first  cost  and  the 
scrap  value  by  the  number  of  years  it  is  estimated  the  machine 
or  building  will  be  used,  and  the  quotient  gives  the  yearly 
amount  which  must  be  charged  to  the  cost  of  the  product. 

The  second  method  is  theoretically  at  least  more  attractive. 
The  cost  charged  to  the  product  on  account  of  a  machine  or 
building  is  not  only  depreciation,  but  also  repairs,  and  it  is 
desirable  that  the  sum  of  these  two  for  each  year  should  be 
fairly  uniform.  When  a  building  or  machine  is  new  the 
repair  cost  will  be  small,  and  it  will  increase  with  increasing 
age.  Therefore  to  keep  the  sum  of  depreciation  and  repairs 
fairly  constant  for  each  year  a  high  depreciation  should  be 
charged  when  the  plant  is  new,  and  should  be  decreased  each 
year.     This  method  of  charging  depreciation  is  also  in   ac- 


34 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


cordance  with  the  actual  value  of  a  machine  or  building  at 
a  forced  sale,  as  there  is  no  doubt  that  the  reduction  in  selling 
price  will  be  greater  after  the  first  year  of  use  than  the  reduc- 
tion in  value  from  the  ninth  to  the  tenth  year.  Moreover,  a 
new  machine  is  probably  competing  with  old  machines,  and 
later,  as  it  grows  old,  is  in  turn  competing  with  new  machines ; 
a  machine  is,  therefore,  better  able  to  stand  the  higher  charges 
for  depreciation  when  new;  and  with  the  low  rate  when  old 
is  better  able  to  compete  with  new  machines. 

There  are  numerous  ways  of  computing  the  decreasing 
rate.  The  method  given  by  Cole  is  simple  and  satisfactory. 
He  divides  the  difference  between  first  cost  and  scrap  value 
by  the  years  of  life,  and  depreciates  each  year  a  fraction 
comprising  the  number  of  years  to  run  as  a  numerator  and 
the  sum  of  the  year  numbers  as  a  denominator;  for  example, 
if  the  lifetime  is  five  years,  add  5,  4,  3,  2  and  i,  getting  15, 
and  in  the  first  year  write  off  five-fifteenths,  in  the  second 
year  four-fifteenths,  and  in  the  last  year  one-fifteenth. 

Applied  to  a  machine  costing  $200  to  last  five  years  and 
with  a  scrap  value  of  $20,  this  works  out  as  follows: 


$200  —  $20  =  $180,  shrinkage. 
Denominator,  5  +  4  +  3  +  24-1 
=  12. 


15;  $180-- 15 


Year. 

Depreciation 
Fraction. 

Depreciation. 

Value. 

0 

I 
2 

3 

4 

5 

$60. 
48. 

24. 
12. 

$200. 
140. 
92. 
56. 
32. 
20. 

y,5  of  $180 

yi5     '' 

THE   USUAL    METHOD   OF   ESTIMATING   AND    APPORTIONING   DE- 
PRECIATION  IS  UNSATISFACTORY. 

In  many  establishments  where  depreciation   is  considered 
the  manner  of  estimating  and   apportioning  the  amounts  is 


THE    VARIOUS    ELEMENTS    OF    COST  35 

almost  entirely  guesswork.  Usually  the  estimated  value  of 
the  buildings  is  taken  as  a  whole  and  a  total  yearly  deprecia- 
tion figure  fixed.  The  machine  tools  and  other  plant  equip- 
ment are  similarly  treated  as  a  whole.  The  total  depreciation 
is  then  treated  as  a  general  expense  and  is  applied  either  as  a 
percentage  of  direct  labor  or  on  the  basis  of  hours  of  pro- 
ductive labor.  There  may  be  great  variation  in  the  deprecia- 
tion of  the  various  buildings  of  the  plant,  and  this  is  also  true 
of  the  plant  equipment.  It  is  impossible  to  even  approximate 
to  an  average  rate  of  depreciation  under  these  conditions. 

In  every  plant  there  should  be  a  complete  inventory  of  the 
plant  equipment  and  buildings.  This  inventory  can  best  be 
kept  on  cards  and  the  condensed  history  of  every  building 
and  every  machine  should  be  given  on  these  cards.  For  each 
building  and  each  class  of  tools  or  equipment  the  life  should 
be  estimated  and  the  yearly  depreciation  determined  and  this 
should  be  recorded  on  the  inventory  cards;  from  these  total 
depreciation  can  then  be  obtained. 

The  usual  method  of  apportioning  depreciation  is  also  un- 
satisfactory. In  a  large  plant  the  depreciation  amounts  to  a 
considerable  sum,  and  by  Charging  this  into  general  expense 
it  is  distributed  as  an  average  and  some  shops  or  departments 
pay  a  much  higher  rate  than  should  be  charged,  while  others 
pay  lower.  For  example,  there  is  comparatively  little  equip- 
ment in  a  sail  loft,  a  rigging  loft,  a  paint  shop,  a  shipwright's 
shop,  or  for  a  laborers'  force,  while  a  large  number  of  men 
are  employed.  By  charging  depreciation  to  general  expense 
the  work  in  the  shops  mentioned  pays  for  a  large  proportion 
of  the  depreciation  of  expensive  equipment  in  the  machine 
shop,  electrical  shop,  sheet-metal  shop,  joiner  shop,  etc. 

It  requires  no  additional  work  to  determine  the  depreciation 
for  each  shop  or  department  and  but  little  additional  clerical 
work  to  apportion  this  each  month  to  the  department  or  shop 
to  which  it  belongs.  The  shop  depreciation  then  becomes  an 
element  of  the  shop  expense  and  only  such  depreciation  as 
cannot  be  charged  to  the  shop  goes  to  the  general  expense. 
With  the  improvements  in  methods  of  shop  management,  de- 


36  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

preciation,  together  with  other  fixed  charges,  will  be  further 
divided  and  apportioned  to  both  machine-tool  times  and  labor,, 
but  such  methods  are  to-day  not  practicable. 

The  disposition  of  depreciation  after  it  has  been  charged 
to  product  comes  within  the  province  of  the  accountant  and 
not  the  cost  keeper,  but  briefly  it  may  be  stated  that  the 
amount  charged  to  product  should  be  credited  to  the  real  es- 
tate and  plant  equipment  accounts  and  debited  to  the  deprecia- 
tion account,  and  should  each  month  be  closed  into  profit  and 
loss.  If  the  establishment  is  operating  at  a  profit  there  is 
available  from  depreciation  a  fund,  the  amount  of  which  just 
equals  the  shrinkage  in  the  value  of  the  physical  assets  of  the 
company  due  to  depreciation.  This  can  be  employed  to  pur- 
chase new  plant  equipment  or  as  a  sinking  fund,  but  must  not 
be  considered  as  an  additional  asset. 

TAXES    AND    INSURANCE. 

These  expenses  require  little  explanation.  The  general 
method  of  distributing  these  by  charging  them  to  general  ex- 
pense is  open  to  the  same  objection,  stated  above,  regarding 
depreciation.  They  should  be  apportioned  to  the  shops  or 
departments  in  accordance  with  the  value  and  the  risks  and 
should  be  charged  to  the  shop  expense,  except  that  portion 
which  cannot  be  charged  to  shops  and  is  for  the  benefit  of 
the  whole  plant,  which  should  be  charged  to  general  expense. 
Special  insurance  should  be  charged  direct  to  the  work  it 
covers.  An  example  of  this  kind  is  the  insurance  of  a  ship 
building  at  a  shipyard,  or  if  a  special  product,  on  account  of 
its  nature,  temporarily  increases  the  insurance  rates  on  the 
whole  plant  or  a  portion  of  it.  In  these  cases  the  additional 
insurance  paid  should  not  be  charged  to  the  expense  accounts, 
but  should  be  charged  direct  to  the  product  which  causes  the 
increase  in  the  regular  rates. 

UPKEEP    OF    PLANT. 

No  question  arises  regarding  ordinary  repairs,  but  there  is 
sometimes  a  tendency  to  charge  minor  additions  and  changes 


THE    VARIOUS    ELEMENTS    OF    COST  37 

and  also  repairs  which  are  in  the  nature  of  renewals  to  the 
capital  account,  and  great  care -should  be  exercised  in  making 
charges  of  this  nature  to  this  account.  No  minor  changejB  or 
additions  should  be  so  charged,  and  no  repairs  in  the  nature  of 
renewals  should  be  charged  unless  it  be  clear  that  they  actu- 
ally add  to  the  market  value  of  the  plant.  In  no  case  should 
additions  or  part  renewals  be  taken  up  direct  in  the  capital 
account,  but  should  be  carried  in  separate  accounts  and  so 
shown  on  the  balance  sheet,  so  that  the  merit  of  these  trans- 
actions may  be  judged.  In  all  ordinary  cases  the  cost  of  up- 
keep should  be  charged  to  the  proper  expense  account. 

INTEREST    AND    RENT. 

There  is  much  discussion  as  to  whether  or  not  interest 
should  be  charged  to  the  product.  If  the  entire  plant  is 
rented  no  one  questions  that  the  rent  paid  should  be  charged 
to  the  cost  of  production,  but  when  the  plant  is  owned  by 
the  company  operating  it,  many  consider  that  interest  and 
rent  should  not  be  charged.  If  it  is  correct  to  charge  rent  in 
the  first  case,  there  should  be  no  question  that  it  is  a  proper 
charge  in  the  second.  The  interest  on  the  investment  must 
be  met  and  this  is  chargeable  whether  the  concern  owns  the 
property  or  not,  for  whether  return  is  made  to  landlords, 
lenders  of  capital  or  to  stockholders,  the  output  must  produce 
some  means  of  meeting  it.  Professor  Cole  in  his  treatise  on 
accounting  puts  this  very  clearly  as  follows : 

"  Rent  in  the  ordinary  use  of  the  word  is  composed  of  two 
elements:  First,  payment  for  exceptional  advantages  accru- 
ing to  the  owner  of  land  or  buildings  because  of  location  or 
other  natural  qualities  —  as  exceptional  shipping  facilities  or 
low  power-cost;  second,  interest  on  the  improvements  made 
on  the  land,  such  as  buildings.  In  the  true  economic  sense, 
rent  is  only  that  part  of  the  payment  which  is  due  to  the  ex- 
ceptional facilities,  as  low  power-cost.  Obviously  rent  arising 
from  such  advantages  is  in  one  sense  not  cost  at  all,  but  a 
measure  of  gain  —  it  measures  the  saving  by  having  the  use 


38  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

of  this  Special  facility.  Even  though  such  economic  rent  is 
paid  to  another,  it  comes  back  in  the  saving.  It  is  an  out-go, 
but  it  is  offset  by  a  special  income  —  or,  what  is  the  same 
thing,  a  reduced  expense  elsewhere.  This  has  led  to  the 
theory  that,  at  least  for  the  manufacturing  concern  owning 
the  land  and  buildings  which  it  uses,  rent  need  not  be  included 
in  the  schedules  of  cost. 

"  The  reply  to  this  lies  in  the  answer  to  the  question,  What 
is  the  purpose  of  keeping  manufacturing  accounts?  Unless 
the  accounting  shows  not  only  a  basis  of  charges  for  manu- 
factured goods,  but  also  what  are  the  gains  from  the  conduct 
of  business,  it  is  not  worthy  of  its  name.  If  the  concern 
pays  rent,  clearly  the  rent  is  a  cost  —  as  much  as  the  payment 
for  wages;  in  both  cases  an  outgo  is  suffered  in  order  that  a 
return  may  be  secured.  If  the  concern  is  the  owner  of  the 
property  that  it  uses,  two  facts  require  that  rent  be  charged 
as  a  cost.  First,  if  the  property  is  valuable  enough  to  yield 
economic  rent  (i.  e.,  more  than  interest  on  the  improvements 
on  the  land),  it  is  so  because  it  confers  some  advantage  in 
louver  costs  —  as  cheap  power  or  low  freights.  If,  then,  rent 
is  excluded  from  costs  and  the  cost  book  shows  only  actual 
cost  paid  to  outsiders  by  the  business,  prices  based  on  the 
cost  book  give  to  the  customer  all  the  advantages  of  the  cheap 
power  or  the  low  freight.  Such  prices  are  not  normal  and 
can  never  long  continue.  The  only  way  to  show  the  facts  is 
to  show  that  the  cheapness  of  power  or  of  freight  is  abnormal, 
and  this  can  be  done  by  entering  rent  as  one  of  the  costs. 
Second,  the  concern  is  in  this  case  not  merely  engaged  in 
manufacturing;  it  is  a  landholder,  and  as  such  it  receives  a 
landholder's  revenue  as  distinguished  from  a  manufacturer's 
revenue.  An  important  purpose  of  accounting  is  to  show 
different  kinds  of  sources  of  revenue." 

In  practice  it  is  not  necessary  to  separate  rent  proper  from 
interest,  and  the  two  should  be  carried  together  as  a  percentage 
of  the  total  investment. 

Interest  should  be  distributed  to  the  product  in  the  same 


THE    VARIOUS    ELEMENTS    OF    COST  39 

manner  as  has  been  described  for  taxes,  insurance,  and  de- 
preciation. The  amount  charged  to  the  product  should  be 
carried  to  the  reserve  interest  account,  and  each  month  should 
be  closed  into  profit  and  loss. 


CHAPTER  IV 

Distribution  of  Indirect  Costs 

The  distribution  of  indirect  costs  should  depend  to  a  certain 
extent  on  whether  payment  for  the  work  is  made  on  the  basis 
of  cost  plus  a  percentage  for  profit,  or  by  the  jobs. 

In  some  establishments  there  is  much  work  for  which  pay- 
ment is  made  by  taking  the  book  costs  and  adding  a  percentage 
of  profit  previously  agreed  upon.  This  is  frequently  the  case 
in  large  ship-repair  jobs,  where  it  is  difificult  to  determine  ex- 
actly the  work  necessary  until  everything  is  uncovered.  It  is 
often  the  case  in  repair  jobs  in  a  machine  shop.  Frequently 
large  buildings  or  other  large  undertakings  are  paid  for  in 
the  same  manner.  Under  these  conditions  the  purchaser  has 
the  right  to  check,  day  by  day,  the  men  employed  on  the  work, 
and  also  to  investigate  the  book  charges.  In  such  cases  the 
indirect  charges,  if  high,  may  be  the  cause  of  much  contention, 
and  this  may  i^^Slilt  in  the  firm  not  getting  future  contracts. 
Very  few  understand  indirect  costs,  and  not  a  few,  who  have 
work  done  at  cost  plus  a  percentage,  feel  that  in  the  in- 
direct charges  they  are  paying  for  something  which  they  do 
not  receive.  They  realize,  of  course,  that  the  general  ex- 
penses must  be  paid,  but  they  consider  that  15  to  20  per  cent, 
of  the  direct-labor  charge  is  ample  to  cover  all  legitimate  ex- 
penses, and  that  anything  in  excess  of  this  is  simply  additional 
profit.  An  establishment  which  charges  60  or  70  per  cent, 
for  indirect  costs  will  be  looked  upon  as  guilty  of  extortion 
and  not  only  will  never  get  additional  work  from  the  cus- 
tomer so  charged,  but  its  reputation  will  suffer  and  it  will  lose 
other  customers. 

Scientific  ideals  are  excellent,  but,  after  all,  a  shop  or  fac- 
tory exists  to  make  money.  This  is  essentially  a  commercial 
age,  and  the  successful  engineer  must  recognize  this  fact  and 

40 


DISTRIBUTION    OF    INDIRECT    COSTS  4 1 

put  aside  some  of  his  scientific  ideals  if,  by  so  doing,  he  can 
place  the  concern  for  which  he  is  working  in  a  better  position 
to  make  a  commercial  success. 

In  an  establishment  which  does  much  work  on  the  cost 
plus  a  profit  basis,  the  cost  system  must  be  arranged  so  that 
the  indirect  costs  will  not  appear  large.  This  can  readily 
be  done  by  charging  everything  possible  direct  to  the  work. 
In  this  case  sub-foremen,  leading  men,  etc.,  should  be  charged 
direct;  all  miscellaneous  material,  as  oil,  waste,  emery  cloth, 
etc.,  and  also  small  tools  should  be  charged  direct  instead  of 
to  the  expense  number.  Machine  rates  should  be  used  and 
to  these  should  be  attached  interest,  depreciation,  taxes  and 
insurance,  not  only  of  the  tool,  but  also  of  the  building.  By 
following  these  methods  the  remaining  indirect  charges  will 
be  small,  and  the  percentage  added  for  indirect  costs  will  ap- 
pear to  the  buyer  reasonable.  This  also  gives  the  buyer  an 
opportunity  each  day  to  check  that  which  has  been  charged  to 
his  account  against  what  has  actually  been  used. 

In  a  strictly  manufacturing  establishment,  or  in  shops  where 
the  repair  work  is  taken  at  a  contract  price,  no  such  conditions 
exist,  and  it  is  more  accurate  and  more  satisfactory  to  make 
the  charges  to  product  differently.  ^^ 

DISTRIBUTE   INDIRECT    COSTS    IN    ACCORDANCE   WITH    BENEFITS 

RECEIVED. 

The  distribution  of  the  indirect  costs  should  be  made  in 
such  a  way  that  each  production  order  will  receive  charges 
which  closely  approximate  to  the  proportional  benefits  it  re- 
ceives from  the  various  elements  of  indirect  costs. 

It  is  well  to  recognize  that  any  practicable  scheme  which 
has  been  devised  or  which  has  been  proposed  for  distributing 
these  costs  can  be  adversely  criticized.  Any  manager  or  en- 
gineer can  take  any  proposed  system  which  can  be  put  in  op- 
eration without  great  cost,  and  advance  many  good  reasons 
to  show  that  it  is  inaccurate.  But  it  should  be  remembered 
that  a  system  proposed  by  these  same  critics  will  be  subject 
to  the  same  fate  at  the  hands  of  others. 


42  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

As  stated  before,  scientific  accuracy  cannot  be  obtained. 
Moreover,  a  system  well  suited  to  one  establishment  is  not 
^  suited  to  another.  The  only  wise  course  is  for  a  manager 
himself  to  thoroughly  study  cost  accounting,  and  then  secure 
an  expert  to  work  out,  under  the  general  instructions  of  the 
manager,  the  details  of  the  system. 

Few  managers  have  the  time  to  devise  and  install  a  system, 
and  at  the  same  time  attend  to  their  other  duties,  but  they 
should  thoroughly  understand  the  principles,  for  unless  they 
do,  they  will  be  unable  to  give  the  expert  the  assistance  and 
support  needed  to  enable  him  to  work  to  the  best  advantage. 

DISTRIBUTION    BY   MACHINE  RATES  THE   MOST   SCIENTIFIC 
(  METHOD. 

~^In  the  present  day,  machinery  performs  a  very  important 
part  in  the  production  of  work.  Very  expensive  machines 
are  designed  and  built  to  reduce  labor  charges,  and  thousands 
of  automatic  and  semi-automatic  machines  are  to-day  doing 
the  work  that  was  formerly  done  by  many  thousands  of  highly- 
paid  mechanics.  It  would  seem  that  the  machine-tool  time  is 
the  most  accurate  and  most  satisfactory  method  of  distrib- 
uting the  indirect  costs,  and  nearly  all  engineers  consider  this 
the  most  accurate,  but  some  do  not  consider  it  the  most  satis- 
factory method. 

A  great  many  of  the  indirect  expenses  of  a  factory  attach 
themselves  naturally  to  the  machine  tools,  as  will  be  seen 
from  the  analysis  of  this  method.  We  have  seen  in  previous 
chapters  the  disadvantages  of  charging  interest,  depreciation, 
taxes  and  insurance  to  general  expense  and  distributing  this 
on  the  basis  of  direct  labor.  These  troublesome  items  of  ex- 
pense naturally  attach  themselves  to  the  machines.  As  a 
large  part  of  the  cost  of  the  plant  is  machinery,  and  as  a 
large  part  of  the  cost  of  real  estate,  buildings,  etc.,  is  for  the 
benefit  of  machinery,  it  is  natural  that  the  expenses  men- 
tioned should  be  distributed  on  the  basis  of  machine-tool  time 
instead  of  labor  time. 

Take  first  the  machine  itself;  the  interest  on  the  money  in- 


DISTRIBUTION    OF    INDIRECT    COSTS  43 

vested  in  the  tool  itself  and  its  foundations,  the  depreciation, 
taxes  and  insurance  due  to  the  tool  can  be  paid  for  by  the 
work  produced  by  the  tool.  The  power  consumed  in  running 
the  tool  and  repairs  to  it  should  be  charged  to  the  product  of 
the  machine.  It  would,  therefore,  seem  that  there  can  be  no 
question  that  at  least  these  expenses  should  be  based  on  the 
machine  time.  The  land  occupied  by  the  shop,  and  the  build- 
ing itself,  are  as  much  for  the  benefit  of  the  machines  as  for 
the  labor  employed.  The  expenses  due  to  interest,  deprecia- 
tion, taxes,  insurance  and  repairs  of  buildings  and  land  can 
be  apportioned  to  the  machine  time  by  making  the  distribution 
on  the  basis  of  floor  space  occupied  by  the  machines.  A  num- 
ber of  other  expenses  attach  themselves  readily  to  the  ma- 
chines, and  by  going  through  these  carefully  it  seems  as  if  it 
might  be  possible  to  establish  an  accurate  rate  for  each  ma- 
chine and  appliance,  which  will  leave  but  few  expenses  to  be 
apportioned  on  the  basis  of  labor. 

There  is  no  doubt  that  this  method,  if  it  can  be  followed, 
is  more  accurate  than  distribution  on  the  basis  of  labor  alone. 
I  believe  that  in  years  to  come  the  indirect  expenses  will  be 
distributed  in  this  manner,  that  is,  partly  by  machine  times 
and  partly  by  labor.  At  the  present  time,  however,  it  is  im- 
practicable in  many  shops,  and  there  are  very  few  where 
it  can  be  used  with  any  degree  of  accuracy. 

In  carrying  out  such  a  system  it  is  necessary  to  make  many 
assumptions,  which  may  be  correct,  but  which  are  more  likely 
to  be  very  much  in  error,  and  the  results  are  likely  to  be  fully 
as  inaccurate  as  if  direct  labor  had  been  used  as  the  basis 
for  distribution,  and  the  machine  rate  involves  much  more 
clerical  work. 

DIFFICULTIES    IN    FOLLOWING    MACHINE-RATE    SYSTEM. 

A  few  of  the  difficulties  which  will  be  encountered  in  at- 
tempting to  follow  this  system  will  be  given :  From  the  sci- 
entific point  of  view  the  cost  of  power  should  be  distributed  to 
the  machines  that  use  the  power.  In  some  of  the  best  treatises 
on  accounting  we  are  told  that  the  power  expense  should  be 


44  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

SO  distributed  and  the  subject  is  then  usually  dismissed  with 
a  general  statement  to  the  effect  that  the  proportion  of  the 
total  power  used  by  each  machine  should  be  measured  or  es- 
timated and  the  power  expense  distributed  on  this  basis. 

This  is  well  enough  for  the  expert  accountant,  but  the  man- 
agers and  engineers  well  know  that  it  is  not  practicable  to 
determine  the  power  used  by  the  various  machines  under 
varying  conditions,  and  that  so-called  estimates  of  power  used 
by  each  machine  are  nothing  more  than  guesses. 

If  the  power  were  entirely  electric,  and  the  machines  were 
motor  driven,  after  extended  observations  fairly  accurate  es- 
timates might  be  made,  but  even  under  these  conditions  the 
rate  for  each  machine  will  vary  in  accordance  with  the  work 
done.  In  many  shops  there  is  electric,  steam,  compressed  air 
and  hydraulic  power,  and  it  is  impossible  to  even  approxi- 
mately distribute  the  power  expense  to  the  machines  in  ac- 
cordance with  the  actual  power  used.  Under  present  condi- 
tions a  manager  can  feel  well  satisfied  if  he  can  approximately 
determine  the  proportion  of  the  total  power  cost  that  should 
be  borne  by  each  shop. 

We  are  also  told  that  the  cost  of  heat  should  be  kept  sep- 
arately and  apportioned  according  to  cubical  contents,  and 
that  the  cost  of  light  should  be  apportioned  in  accordance 
with  floor  area.  The  manager  well  knows  that  this  is  impos- 
sible; the  lightning  circuits  are,  in  nearly  all  cases,  taken  from 
the  power  mains,  and  the  same  boilers  that  supply  steam  for 
the  steam  hammers  supply  steam  for  the  testing  slab,  for 
heating,  for  driving  tools,  and  a  number  of  other  purposes. 

Any  attempt  at  scientific  accuracy  in  the  distribution  of  the 
power  expense  must  necessarily  be  a  failure. 

If,  however,  assumptions  are  made  and  a  machine  rate  car- 
rying the  greater  part  of  the  expense  burden  is  established, 
other  serious  difficulties  are  experienced  in  applying  these 
rates.  It  is  seldom  that  any  machine  tool  is  continuously  em- 
ployed, and  some  disposition  must  be  made  of  the  idle  time. 
This  can  be  done  by  estimating  the  number  of  days  in  the  year 
that  the  machine  will  be  used  and  basing  the   rate  on  the 


DISTRIBUTION    OF    INDIRECT    COSTS  45 

probable  use  of  the  machine,  or  by  charging  the  idle  time  of 
each  machine  to  an  expense  number  and  pro-rating  this  by- 
direct  labor,  or  by  the  use  of  an  auxiliary  rate  for  idle  time. 
The  use  of  any  of  these  methods  immediately  destroys  any 
claims  that  may  have  been  made  for  scientific  accuracy. 

There  is  still  another  important  objection.  There  are  very 
few  shops  in  which  work  is  carefully  routed  to  the  machine 
best  suited  for  the  work,  and  oftentimes  work  will  go  to  a 
large  machine  with  a  high  rate  when  it  could  have  been  done 
equally  as  well  in  a  smaller  machine  with  a  lower  rate.  Or 
even  if  the  work  is  carefully  routed  it  will  often  be  found  that 
the  smaller  machines  are  crowded  with  work  and  to  avoid 
delay  the  work  which  should  go  to  the  small  machine  is  put  in 
an  idle  large  machine  at  a  much  higher  rate.  These  condi- 
tions completely  upset  accurate  cost  keeping  and  give  costs 
which  are  very  misleading.  Whenever  machine  rates  are  used 
in  a  jobbing  shop  these  difficulties  are  encountered,  and  I 
know  of  cases  where  considerable  delays  have  been  experi- 
enced because  a  foreman  who  wished  to  keep  down  his  costs 
would  not  put  work  in  an  idle  machine  of  a  higher  rate,  but 
would  wait  for  days  to  get  the  work  in  a  lower-rated  machine. 

The  machine-rate  method  is,  no  doubt,  theoretically  very 
attractive,  and  it  is  advocated  not  only  by  accountants,  but 
also  by  many  engineers,  but  in  practice  this  system  has  made 
no  great  headway,  on  account  of  the  difficulty  of  its  applica- 
tion to  the  average  shop. 

INACCURACIES  OF  DISTRIBUTION   BY  DIRECT-LABOR  METHOD. 

Distribution  of  the  burden  by  the  direct-labor  method  is  ad- 
mittedly not  scientifically  accurate,  but  is  by  far  the  most 
simple  and  is  most  generally  used.  It  is,  therefore,  desirable 
to  examine  the  inaccuracies  of  this  method. 

Many  of  the  expenses  attached  to  a  manufacturing  plant 
bear  no  relation  to  the  direct-labor  expenditures.  This  is 
particularly  true  of  the  fixed  charges,  such  as  interest,  de- 
preciation, insurance  and  taxes ;  these  charges  go  on  whether 
labor  is  employed  or  not,   and  their  distribution  by  direct- 


46  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

labor  expenditures  cannot  be  defended  except  on  account  of 
the  simplicity  of  the  method  and  the  knowledge  that  under 
the  shop  conditions  usually  found,  any  other  method  is  equally 
inaccurate. 

Under  the  direct-labor  method,  work  done  in  costly  auto- 
matic machines,  or  in  semi-automatic  machines  with  cheap 
attendants,  receives  but  a  small  part  of  the  indirect  charges, 
while  it  should  receive  a  large  part.  The  work  at  the  bench, 
which  requires  practically  no  equipment  but  does  require  a 
skilled  machinist  at  perhaps  $4  per  day,  is  charged  with  twice 
as  much  burden  as  the  work  in  a  ten-thousand-dollar  machine 
run  by  a  two-dollar-a-day  operator.  To  carry  this  still  fur- 
ther, the  work  in  the  ten-thousand-dollar  strictly  automatic 
machine  carries  none  of  the  burden,  not  even  power,  while 
rightfully  it  should  carry  a  large  proportion  of  the  burden. 

On  the  other  hand,  it  must  be  admitted  that  in  the  average 
shop  these  conditions  are  exceptions,  and  these  can  be  met 
by  making  charges  for  the  use  of  special  machines  and  de- 
ducting the  amount  so  charged  from  the  shop-expense  burden, 
distributing  the  remainder  in  accordance  with  the  direct-labor 
expenditures. 

Any  system  of  cost  keeping  must  be  applied  intelligently  to 
meet  special  conditions.  This  is  one  of  the  reasons  why  only 
managers  and  engineers  are  able  to  plan  a  satisfactory  system. 
The  expert  accountant  knows  nothing  of  these  conditions,  and 
it  is  not  possible  for  him  to  meet  them. 

DISTRIBUTION    OF    INDIRECT    CHARGES    BY    DIRECT    LABOR. 

There  are  several  ways  of  distributing  the  burden  in  ac- 
cordance with  the  direct-labor  expenditures.  The  one  most 
generally  used  is  to  determine  the  proportion  of  the  indirect 
shop  charges  to  the  direct  labor  expended  in  that  shop,  which 
gives  the  rate  in  cents  for  each  dollar  expended  on  direct 
labor.  The  general  expense  rate  is  determined  by  dividing 
the  total  of  the  general  expenses  by  the  total  direct  labor  of 
the  establishment.  These  two  rates  are  added  and  multiplied 
by  the  direct  labor  expended  in  the  shop  on  each  production 


DISTRIBUTION    OF    INDIRECT    COSTS  47 

order,  which  gives  the  indirect  charges  for  each  order  for 
that  shop.  For  example,  in  an  estabhshment  with  a  machine 
shop,  a  blacksmith  shop  and  an  electrical  shop,  the  expendi- 
tures are  as  follows: 

Machine  Shop : 

Direct  labor  charged  to  production  orders $5,ooo 

Indirect  shop  charges,  labor,  material  and  expenses..   2,500 

Blacksmith  Shop : 

Direct  labor  charged  to  production  orders 1,000 

Indirect  shop  charges,  labor,  material  and  expenses.  .      700 

Electrical  Shop: 

Direct  labor  charged  to  production  orders 1,000 

Indirect  shop  charges,  labor,  material  and  expenses..      400 

General  Expense: 

The    general    expenses,    not    chargeable    to    a    shop, 

amount  to i  ,400 

The  expense  rates  are  then  as  follows: 

Machine  shop :    ^    =  50  cents  for  each  dollar  of  direct  labor 

expended ; 
Blacksmith  shop:   ^  =70  cents; 
Electrical  shop :   ■—  =  40  cents ; 
General  Expense:   ^000+10^+1000  =20  cents. 

The  direct  labor  charged  on  each  production  order  in  the 
machine  shop  is  increased  by  0.7 ;  in  the  blacksmith  shop  by 
0.9;  in  the  electric  shop  by  0.6.  The  total  sum  of  indirect 
charges  thus  obtained  is  the  total  indirect  cost  for  the  order. 

A  production  order  on  which  the  direct-labor  expenditures 
are:  Machine  shop,  $200;  blacksmith  shop,  $100;  and  elec- 
trical shop,  $50;  will  carry  the  following  indirect  costs: 

Machine    shop $200  X  0.7  =  $140 

Blacksmith    shop 100  X  0.9  =      90 

Electrical  shop 50  X  0.6  =      30 

Total  indirect  costs $260 

This  can  be  carried  in  the  total  cost  as  a  separate  item,  the 
elements  being  direct  labor,  direct  material  and  indirect  costs; 
or,  if  desired,  the  indirect  charges  may  be  merged  into  the 
labor  and  material  by  adding  the  labor  portion  of  the  indirect 


48  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

charges  to  direct  labor  and  adding  the  portion  due  to  material 
and  expenses  to  the  direct  material,  the  total  cost  showing 
only  as  labor  and  material. 

The  latter  method  is  strongly  advocated  by  some  of  the 
best  English  authorities  —  particularly  for  shipyard  accounts. 
This  method  has  an  important  advantage,  in  that  it  enables 
the  engineer  to  establish  unit  prices  —  per  pound,  per  foot, 
per  piece,  etc. —  separately  for  labor  and  for  material.  Costs 
divided  in  this  manner  are  of  assistance  in  the  preparation  of 
estimates  for  new  work,  particularly  if  the  work  is  a  large  un- 
dertaking such  as  the  construction  of  a  large  ship. 

Another  method  for  the  distribution  of  the  indirect  charges 
is  by  means  of-  the  direct-labor  hours.  In  accordance  with 
this  method  the  shop-expense  rate  is  determined  by  dividing 
the  total  shop  expense  by  the  number  of  hours  of  direct  labor 
expended  in  the  shop.  The  general  expense  rate  is  found  by 
dividing  the  total  general  expense  charges  by  the  total  num- 
ber of  hours  of  direct  labor  expended  in  the  establishment. 
These  rates  are  applied  as  described  and  illustrated  above, 
except  that  the  hour  of  direct  labor  is  the  unit  of  distribution 
instead  of  the  dollar  of  direct-labor  expenditure. 

There  are  arguments  both  for  and  against  each  of  these 
two  methods.  The  distribution  by  expenditures  for  direct 
labor  is  more  simple  and  does  not  require  as  much  clerical 
work  as  the  hours  of  labor  method,  and  it  is  probably  for  this 
reason  that  it  is  more  generally  used.  The  hours  of  direct- 
labor  method  is  a  little  nearer  to  the  machine-rate  method, 
which  will  no  doubt  eventually  be  used  when  scientific  shop 
methods  become  more  general. 

SHALL  THE  ACTUAL  MONTHLY  RATES,  OR  THE  AVERAGE  RATES, 

BE    USED? 

In  the  distribution  of  the  indirect  charges,  rates  determined 
by  previous  experience,  as  the  last  year's  rates,  are  some- 
times used  instead  of  the  actual  rates  determined  each  month. 
For  the  purpose  of  cost  keeping  there  can  be  no  objection  to 
using  the  actual  rates  determined  each  month,  and  this  method 


DISTRIBUTION    OF    INDIRECT    COSTS  49 

has  many  advantages.  In  the  preparation  of  estimates  for 
new  work,  however,  the  average  rates  should  be  used  or,  bet- 
ter still,  the  average  rates  corrected  for  conditions  that  are 
expected  when  the  work  will  be  undertaken.  In  this  way 
any  abnormal  conditions  affecting  the  monthly  rates  will  not 
show  in  the  estimates.  By  using  the  actual  monthly  rates  for 
cost  keeping  the  entire  expense  is  distributed  and  there  is  no 
necessity  for  a  loss  and  gain  expense  account. 

SIMPLEST    METHOD    BEST    FOR    THE    GREAT    MAJORITY    OF 

SHOPS. 

The  importance  of  better  cost-keeping  methods  in  removing 
demoralizing  competition  and  establishing  stable  conditions  in 
much  of  the  repair  and  manufacture  work,  has  been  previ- 
ously pointed  out.  The  establishments  that  it  is  desired  to 
reach  are  not  the  ones  where  the  manager  is  debating  whether 
he  shall  distribute  the  charges  for  heat  in  accordance  with 
floor  area  occupied  by  a  machine  or  the  cubical  contents  taken 
up  by  the  machine.  The  establishments  that  I  desire  to  reach 
are  the  thousands  where  the  manager  does  not  include  in  the 
costs  charges  for  depreciation  or  interest,  and  if  these  are 
considered  at  all  it  is  only  to  take  out  of  the  profits  at  the 
end  of  the  year  a  lump  sum  for  these  and  other  fixed  charges, 
and  the  amount  depends  on  the  amount  of  the  profits.  If 
these. thousands  of  establishments  can  be  reached  and  mana- 
gers and  owners  can  be  interested  in  better  cost  methods,  a 
great  deal  of  good  will  be  accomplished. 

It  is,  therefore,  desirable  to  present  a  skeleton  cost  system 
in  the  simplest  form.  The  most  simple  methods  which  re- 
quire the  least  amount  of  clerical  labor  are,  therefore,  chosen 
and  the  distribution  of  the  indirect  costs  is  made  by  means  of 
the  direct-labor  expenditures. 

With  interest  awakened  in  the  subject  of  cost  accounting 
many  managers  will  study  the  question  as  applied  to  their  own 
conditions,  and  each  can  go  as  far  as  he  likes  or  as  far  as  his 
conditions  will  warrant  in  his  effort  to  secure  greater  ac- 
curacy.    If  a  manager  prefers   he   can  use  the   productive- 


50  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

hour  rates  to  distribute  the  indirect  charges  with  practically 
no  changes  in  the  methods  outlined.  Or,  if  he  has  some  ex- 
pensive automatic  or  semi-automatic  machine  tools,  for  which 
he  wishes  to  charge  rates,  he  can  establish  the  rates  and  charge 
these  to  the  production  orders  and  subtract  the  amounts  thus 
charged  from  the  shop  expense. 

Perhaps  in  some  shops  where  cost  methods  have  received 
but  little  attention  in  the  past,  machine  rates  can  be  success- 
fully established,  but  it  is  recommended  that  before  the  ma- 
chine-rate system  is  started  a  good  shop  organizer  be  secured 
to  work  out  all  details. 

THE    WORK    IN    EACH    SHOP    OR    DEPARTMENT    SHOULD    CARRY 
ITS    OWN    EXPENSE. 

The  expenditures  made  for  the  benefit  of  the  work  in  a 
shop  or  department  should  be  distributed  to  the   work  ac- 
Tcomplished  in  that  department. 

Each  shop  or  department  should,  therefore,  have  a  separate 
expense  account,  which  is  subdivided  into  a  sufficient  number 
of  sub-accounts  to  enable  a  manager  to  know  exactly  for  what 
each  expenditure  is  made.  It  is  only  in  this  way  that  ex- 
travagance can  be  checked,  and  the  benefits  derived  from  each 
expenditure  determined. 

A  common  method  of  but  one  expense  account  for  each 
shop  against  which  all  expense  for  the  shop  is  charged  is  very 
unsatisfactory  and  "leads  to  extravagance,  and  it  is  impossible 
to  analyze  the  expenditures. 

Not  only  should  the  shop  expense  carry  the  usual  expendi- 
tures made  to  this  account,  but  it  should  carry  its  proper 
share  of  the  fixed  charges.  Interest  and  rent  based  on  the 
investment  in  land,  buildings  and  equipment  should  be  in- 
cluded; depreciation  of  buildings  and  equipment  should  be 
included;  taxes  to  shop  land,  buildings  and  equipment  should 
be  included ;  insurance  of  shop  buildings  and  equipment  should 
also  be  included. 

The  amount  of  these  fixed  charges  that  should  be  carried 
by  the  shop  expense  is  easily  determined ;  for  interest,  taxes 


DISTRIBUTION    OF    INDIRECT    COSTS  5 1 

and  insurance  it  is  only  necessary  to  determine  the  amount  of 
the  shop  investment  or  value  as  a  proportion  of  the  total  in- 
vestment or  value,  and  use  this  proportion  applied  to  the  total 
charges  under  each  head  for  the  entire  plant ;  for  depreciation 
the  actual  amounts  to  be  written  off  due  to  the  shop  buildings 
and  equipment  should  be  used.  The  proper  proportion  of  the 
total  power-house  expense  should  be  included  in  the  shop- 
expense  account,  but  this  is  not  so  easily  determined. 

When  so  many  are  advocating  the  distribution  of  this  ex- 
pense to  each  machine  we  can  at  least  claim  that  a  fair  ap- 
proximation can  be  obtained  for  each  shop.  If  electric  power 
only  is  used  the  power  consumed  by  each  shop  can  be  obtained 
exactly  from  meter  readings.  This,  however,  is  seldom  the 
case,  as  ordinarily  steam,  compressed  air,  hydraulic  and  elec- 
tric power  are  used,  and  the  situation  is  further  complicated 
by  the  fact  that  in  many  establishments  power  is  used  outside 
of  the  shop  by  men  from  the  shop ;  for  example,  compressed 
air  by  the  machinists  for  running  air  tools,  or  electric 
power  for  the  same  purpose  or  for  electric  lights,  or  both 
forms  of  power  for  hoists  for  handling  material  in  erection 
work. 

These  same  conditions  exist  for  nearly  every  shop  in  the 
establishment.  Under  these  conditions  it  is  impossible  to 
measure  the  amount  of  power  used  by  each  shop  and  the  men 
from  the  shop.  The  proportion  of  the  power-house  expense 
to  be  borne  by  each  shop  or  department  must,  therefore,  be 
estimated. 

In  making  this  estimate  consideration  should  be  given  to 
the  following  conditions  in  each  shop:  Number  of  machines 
requiring  power  and  total  horsepower  required;  proportion  of 
time  machines  are  in  operation;  the  amount  of  power  required 
by  men  working  outside  of  the  shop;  the  quantity  of  work 
in  each  shop. 

From  consideration  of  these  conditions  the  manager  de- 
termines the  proportion  of  the  total  power  expense  that  should 
be  borne  by  each  shop.  This  proportion  may  vary  from 
month  to  month  owing  to  change  in  conditions,  and  the  per- 


52  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

centage  to  be  charged  to  each  shop  should  be  determined  each 
month. 

No  doubt  some  will  consider  that  due  to  the  inaccuracy 
of  estimates  obtained  in  this  manner  the  power  expense 
might  as  well  be  charged  to  the  general  expense  account  and 
pro-rated  direct  with  that  account  and  thus  reduce  the  clerical 
work.  This  view  is  not  well  taken,  for  we  know  that  some 
shops,  for  example,  the  paint  shop,  employ  a  comparatively 
large  number  of  men  and  use  but  little  power,  while  the 
forging  shop,  employing  a  less  number  of  men,  uses  a  very 
large  amount  of  power.  By  charging  power  to  the  general 
expense  each  dollar  expended  in  the  paint  shop  for  direct 
labor  carries  as  much  burden  for  power  as  each  dollar  in  the 
forging  shop.  By  distribution  to  shops,  even  though  based  on 
estimates,  these  glaring  inequalities  can  be  avoided. 

POWER-PLANT    EXPENSE. 

The  power-plant  expense  should  be  recorded  under  appro- 
priate subheads  as  described  for  the  shop  expense.  There 
should  be  included  in  this  not  only  the  expenditures  for  re- 
pairs and  maintenance  of  buildings  and  equipment,  and  labor 
and  material  employed  in  the  production  and  transmission  of 
power,  but  there  should  also  be  included  charges "^or  deprecia- 
tion, interest,  taxes  and  insurance  due  to  power-house  build- 
ings, land,  machinery  and  transmission  lines.  The  up-keep 
of  transmission  lines  from  the  power  house  to  the  shops 
should  be  charged  to  the  power-plant  expense.  Transmission 
lines  and  power  machinery  inside  of  the  shops  should  be 
charged  to  the  shop  expense.  This  is  a  more  or  less  arbi- 
trary division,  but  it  is  reasonable  and  works  well  in  practice. 
The  power  expense  for  each  month  is  apportioned  to  the 
various  shops  or  departments  in  the  manner  previously  de- 
scribed. 

STOREHOUSE  EXPENSE. 

The  storehouse  should  be  conducted  as  a  separate  depart- 
ment and  should  have  an  expense  account  properly  subdivided. 


DISTRIBUTION    OF    INDIRECT    COSTS  53 

The  total  expense  of  the  storehouse  and  purchasing  depart- 
ment should  be  distributed  to  material  issued  for  production 
orders  and  this  expense  disappears,  becoming  an  element  of 
the  cost  of  the  material. 

The  storehouse  expense  must  include  interest,  taxes  and 
insurance  on  storehouse  land,  buildings,  equipment  and  stock. 
Depreciation  of  buildings  and  equipment  must  be  charged, 
and  in  a  separate  account  depreciation  of  stock,  and  losses 
due  to  breakage  and  waste  must  be  charged. 

The  storehouse  expense  should  be  distributed  each  month 
to  the  issues  for  that  month.  Generally  this  should  be  ap- 
plied as  a  percentage  of  value,  but  in  the  case  of  articles  like 
lumber,  structural  steel,  etc.,  received  in  large  quantities,  and 
where  the  expenditures  for  receiving,  transporting  and  piling 
are  large,  separate  orders  should  be  issued  for  this  work,  and 
the  cost  should  be  charged  direct  to  the  cost  of  the  material. 

GENERAL   EXPENSE. 

The  general  expense  includes  the  cost  of  administration, 
office  expenses,  fixed  charges,  etc.,  that  cannot  be  located  to 
shops  and  departments,  and  the  expense  of  operating  and 
maintaining  general  facilities  or  equipment  for  the  use  of  all 
shops  and  departments,  such  as  railway  tracks,  roads,  yard 
cranes,  general  yard  labor,  floating  property,  railway  freight 
service,  etc. 

GENERAL  EXPENSE  AND  SHOP  EXPENSE  TO  BE  DISTRIBUTED  TO 
PRODUCTION   ORDERS. 

By  the  methods  outlined  only  general  expense  and  shop 
expense  are  distributed  to  production  orders.  These  are  dis- 
tributed at  the  end  of  each  month  as  previously  described. 
While  the  storehouse  expense  is  distributed  to  material  issued 
for  production  orders,  for  convenience  it  is  found  best  in 
practice  to  distribute  this  at  the  end  of  each  month  as  a  per- 
centage on  the  total  value  of  the  material  charged  to  each  pro- 
duction order.  It  will,  therefore,  appear  on  the  cost  of  work 
card  as  an  indirect  expense.     With  the  distribution  of  these 


54  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

indirect  charges  to  production  orders  the  total  factory  cost  is 
shown;  but  to  obtain  total  cost  the  selling  expense  must  be 
included. 

SELLING    EXPENSE. 

As  a  monthly  balance  sheet  is  desired,  the  selling  expense 
should  be  distributed  each  month.  This  can  be  applied  to 
the  product  actually  sold,  which  is  the  proper  way  for  a  man- 
ufacturing concern  like  a  machine-tool  builder.  In  a  jobbing 
repair  shop,  or  in  an  establishment  like  a  shipyard,  where 
there  is  both  repair  and  construction  work  and  where  con- 
tracts require  several  years  to  complete,  it  is  impracticable  to 
distribute  the  selling  expense  to  the  product  sold.  In  these 
cases  the  selling  expenses  should  be  kept  separately,  but  should 
be  merged  with  the  general  expense  and  distributed  with  it. 
The  factory  cost  will  in  these  cases  then  include  the  selling 
cost. 


CHAPTER  V 

The  Production  Order,  Shop  Order  and  Cost  Section 

Records 

In  outlining  the  cost  system  no  attempt  will  be  made  to  de- 
scribe an  organization,  and  but  few  forms  will  be  given.  In 
the  first  place,  to  describe  an  organization  giving  all  forms 
will  require  more  space  than  is  available,  and  in  the  second 
place  there  is  but  little  advantage  gained  in  doing  this.  Con- 
ditions vary  so  greatly  that  an  organization  and  forms  which 
are  ideal  for  one  establishment  will  be  entirely  unsuited  to 
another.  The  general  principles  are,  however,  the  same,  and 
when  these  are  understood  it  is  not  difficult,  in  devising  the 
details,  to  apply  these  principles  to  the  conditions  existing 
in  each  shop. 

In  any  but  the  smallest  establishments  there  are  usually 
several  shops  or  departments,  and  in  the  system  outlined  pro- 
vision will  be  made  for  several  shops.  If  it  is  desired  to 
apply  the  methods  described  to  an  establishment  with  but  one 
shop,  this  can  readily  be  done.  I  have  selected  a  shipyard 
as  an  example,  because  it  contains  many  dissimilar  shops,  and 
further  because  I  have  been  intimately  associated  with  ship- 
yard accounts  and  management  for  many  years. 

uniform  size  blank  forms. 

Too  often  little  attention  is  given  to  uniform  sizes  for 
blank  forms.  In  many  establishments  practically  every  blank 
is  of  a  different  size.  This  makes  filing  more  difficult  and 
there  are  no  advantages. 

The  forms  can  and  should  be  reduced  to  a  few  standard 
sizes  and  every  new  blank  should  be  made  to  conform  to  a 
standard  size.     Vertical  filing  is  generally  used  and  has  many 

55 


56  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

advantages.     The  standard  sizes  selected   for   forms   should 
lit  standard  vertical  filing  cases. 

All  cost  records  should  be  kept  on  cards  and  not  in  books. 
The  advantages  of  card  records  are  well  known  and  no  com- 
ment is  required. 

THE    PRODUCTION    ORDER. 

The  production  order,  which  will  be  called  the  "  Job  order," 
is  the  authority  for  the  factory  to  undertake  work.  It  should 
be  signed  by  the  manager  or  his  representative,  who  is  author- 
ized to  order  work.  No  work  should  be  undertaken  except  on 
written  job  orders  or  on  standing  indirect  cost  orders. 

The  job  order  should  indicate  either  on  its  face,  or  by  ac- 
companying plans  and  specifications,  exactly  the  work  that  is 
to  be  accomplished.  In  many  repair  jobs  it  is  not  possible  at 
first  to  give  in  detail  the  work  to  be  accomplished.  In  such 
cases  a  preliminary  order  should  be  issued  to  make  a  com- 
plete survey  of  the  job  to  determine  exactly  the  work  neces- 
sary, and  when  this  is  accomplished  to  issue  job  orders  for  the 
work  itself.  It  is  very  bad  practice  to  issue  job  orders  in 
general  terms  and  follow  the  job  order  with  oral  instructions 
for  the  work  actually  required. 

The  order  must  at  least  be  in  duplicate,  one  copy  to  the 
cost  file  and  one  copy  to  the  shop  or  department  that  is  to  do 
the  work.  Ordinarily  from  four  to  eight  copies  will  be  re- 
quired in  order  that  information  can  be  given  to  all  who  are 
interested  or  responsible  for  any  part  of  the  work. 

The  order  should  be  typewritten  and  the  paper  used  should 
be  of  a  size  for  the  typewriter  and  permit  of  manifolding;  it 
should  be  a  standard  size,  and  when  a  number  of  copies  are 
regularly  required,  it  is  desirable  to  use  different  colors,  for 
example,  white  for  cost  file,  blue  to  the  foreman  responsible 
for  the  job,  pink  to  other  foremen  who  have  some  work  on 
the  job,  salmon  to  the  superintendent,  etc.  A  convenient  size 
and  type  of  job  order  is  shown  in  Fig.  i. 


PRODUCTION    ORDER    AND,  COST    SECTION    RECORDS  57 


Job  Order   No Title Sub-Title... 

Appropriation Gen'l    Head 

NAVY  YARD,  MARE  ISLAND,  CAL., 


Sir:-  You  will  please 


19. 


ESTIMATED    COST  ACTUAL    COST 

Labor    

Material  

Indirect    • 

Total  ___^^_^_^^ 

Authority     » 

Date   of   Completion 

To 

Respectfully, 

To  be  returned  to  office  upon  completion  of  work 
Fig.  I.    Job  Order  issued  by  The  Main  Office.     Size  6"  by  SVa". 

A  regular  system  for  numbering  orders  should  be  followed. 
Job  orders  for  output  will  be  designated  by  numerals ;  stand- 
ing  expense  orders- will  be  designated  by  letters;  special  ex- 
pense orders  will  be  numerals  followed  by  the  classification 
letters  showing  the  expense  account  to  which  the  order  be- 
longs and  into  which  the  cost  will  be  carried  for  record  and 
for  distribution.  All  service  cards  for  labor,  performed  and 
recj^uisitions  for  material  obtained  will  bear  the  symbol  or 
charge  number  of  the  job  order  for  the  work  which  obtains 
the  benefit  of  the  labor  and  material. 


SHOP   ORDERS  ISSUED  BY  AUTHORITY  OF  THE   PRODUCTION 

ORDER. 

It  is  seldom  that  all  the  work  required  by  a  production 
order  can  be  accomplished  in  one  department  or  one  shop. 


58  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

MFG,  DEPT.    1101.  NAVY  YARD,   MARE   ISLAND.  CAL. 

SHOP  ORDER. 
OUTPUT  ACCOUNT. 


JOB  ORDER  NO 

TITLE SUBTITLE 


APPROPRIATION 

GENERAL  HEAD- 


TO 


SHOP. 


You  will  do  the  foUow^ing  work  charging  labor  and  material, 
as  above : 


WORK  DELIVERED  COMPLETED  BY. 


FOREMAN  ..„ S  HOP 


ORIGINAL  AND  DUPLICATE  TO  BE  FORWARDED  TO  SHOP  IN  WHICH  WORK  IS  DONE. 
FOREMAN  RECEIVING  ORDER  WILL  PUT  IN  DATE  OF  RECEIPT  AND  DATE  ON  WHICH  WORK 
WILL  BE  COMPLETED.  RETAIN  ORIGINAL  AND  IMMEDIATELY  RETURN  DUPLICATE.  WHEN 
JOB  IS  COMPLETED  FOREMAN  DOING  WORK  WILL  FILL  IN  ACTUAL  DATE  OF  COMPLETION 
AND  FORWARD  TO  SHOP  THAT  ISSUED  THE  ORDER  AND  IF  WORK  IS  SATISFACTORY 
ORDER  WILL  BE  INITIALED  AND  RETURNED  TO  THE  FOREMAN  WHO  DID  THE  WORK. 


ORDER  WAS   RECEIVED. 
WILL  BE  COMPLETED 


.  AND  THE  WORK 
FOREMAN 


WORK  ACTUALLY  COMPLETED. 


FOREMAN 


IS    WORK    SATISFACTORY? 


Fig.  2. 


FOREMAN 

Shop  Order  for  Output  issued  by  one  foreman  on  another  by 
authority  of  a  job  order.     size  6"  by  81/2". 


PRODUCTION    ORDER    AND    COST    SECTION    RECORDS  59 

MFG.  DEPT.  1102  NAVY  YARD,   MARE  ISLAND,  CAL. 


SHOP    ORDER. 

EXPENSE  ACCOUNT 

JOB  ORDER    NO 

TO  SHOP. 

ESTIMATED     COST     LABOR 

ESTIMATED    COST    MATERIAL _ 

TOTA  L ... 

APPROVED    BY 

INSTRUCTIONS. 

1,  ORIGINAL  AND  DUPLICATE  TO  BE  FORWARDED  TO  THE  FOREMAN  WHO  IS  TO  DO 
THE  WORK.  WHO  WILL  FILL  IN  THE  ESTIMATE  AND  FORWARD  BOTH  COPIES  TO  THE 
OFFICER  AUTHORIZED  TO  APPROVE  THE  WORK.  WHO  WILL  FILL  IN  THE  DATE  OF  RE- 
CEIPT AND  DATE  OF  PROMISED  COMPLETION.  INITIAL.  RETAIN  ORIGINAL.  FORWARD 
DUPLICATE  TO  SHOP  REQUESTING  WORK  AND  PROCEED  WITH  THE  WORK, 

2.  WHEN  COMPLETED.  DATE  OF  COMPLETION  WILL  BE  FILLED  IN  AND  ORIGINAL 
FORWARDED  TO  FOREMAN  REQUIRING  WORK.  WHO  WILL  EXAMINE  WORK,  STATE  IF  SAT- 
ISFACTORY. INITIAL  AND  RETURN  TO  FOREMAN  WHO  DID  THE  WORK. 


WORK     REQUIRED. 


WORK  DELIVERED  COMPLETED  BY. 


FOREMAN  „_ S  HOP 


ORDER  WAS   RECEIVED.. 
WILL  BE  COMPLETED. 


WORK  ACTUALLY  COMPLETED_.... 
IS    WORK    SATISFACTORY?     


AND  THE  WORK 

FOREMAN 

FOREMAN 


FOREMAN 

Fig.  3.     Shop  Order  for  Expense  Account  Work.     This   must  be  ap- 
proved BY  THE  Shop  Superintendent.     Size  6"  by  8V2". 


6o  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

When  the  work  required  in  several  shops  is  well  defined,  the 
foreman  having  primary  cognizance  of  the  whole  job  is  des- 
ignated on  the  order  and  the  foremen  of  other  shops  having 
some  part  of  the  work  are  given  copies,  which  is  their  au- 
thority to  proceed  with  this  work. 

In  many  cases,  however,  miscellaneous  incidental  work  will 
be  required  of  shops  other  than  those  holding  job  orders. 
When  work  of  this  kind  is  required  it  is  obtained  by  the  fore- 
man holding  the  order  issuing  a  secondary  order  called  a 
*'  shop  order  "  for  the  work  desired.  This  should  never  be 
done  verbally,  but  should  always  be  a  written  order  on  a 
standard  form  and  should  definitely  describe  the  work  to  be 
accomplished.  The  shop  order  should  bear  the  same  charge 
number  as  the  production  order. 

In  Fig.  2  is  shown  a  shop-order  form  for  output  work, 
which  has  given  satisfaction.  In  Fig.  3  a  shop-order  form 
for  expense-account  work  is  shown.  It  will  be  noted  that  the 
order  for  the  output  work  does  not  require  approval,  while 
the  expense-account  work  requires  the  approval  of  the  shop 
superintendent. 

MUSTERING  THE  WORKMEN. 

There  are  several  satisfactory  methods  for  mustering  the 
workmen.  When  the  plant  consists  of  a  number  of  shops 
more  or  less  scattered,  it  is  necessary  to  have  a  check  at  the 
workmen's  entrance  and  also  at  their  places  of  work.  This 
can  best  be  done  in  the  following  manner :  A  brass-numbered 
check  is  issued  to  each  workman,  the  number  being  the  work- 
man's number  for  the  payroll,  for  tool  issues  and  for  charg- 
ing time.  Check  boards,  one  for  each  shop  or  trade,  are  at 
the  entrance  to  the  plant,  and  the  workman  as  he  comes  in 
hangs  the  check  on  a  hook  under  his  number;  when  he  goes 
out  he  removes  the  check.  In  this  way  the  checks  also  serve 
as  a  pass  into  the  works.  The  illustration,  Fig.  4,  shows  the 
checking  station  for  a  large  establishment  with  scattered 
shops.  When  the  muster  is  over,  on  muster-check  cards  the 
numbers  that  have  not  mustered  are  noted  and  these  cards 


PRODUCTION    ORDER   AND    COST   SECTION    RECORDS 


6l 


62  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

are  sent  to  the  office  to  be  checked  against  the  muster-card  re- 
ports from  the  shops. 

Employees  arriving  late  are  passed  in  on  special  reports 
made  by  the  gate  keeper  to  the  main  time  office ;  those  leaving 
at  other  than  the  regular  quitting  time  are  passed  out  on  fore- 
man's passes  w^hich  are  taken  up  at  the  gate  and  turned  in  to 
the  main  office. 

In  the  shops  and  other  places  of  w^ork  there  are  registering 
clocks  on  v^hich  each  workman  is  required  to  register  arrival 
and  departure.  The  clocks  also  serve  to  register  on  the  serv- 
ice cards  the  time  of  beginning  and  completing  each  job.  If 
the  clocks  are  used  for  the  latter  purpose,  more  than  one 
clock  will  be  required  for  each  shop,  unless  the  shop  is  small, 
or  much  time  will  be  lost  in  workmen  going  from  work  to 
the  clock.  In  shipyards  a  number  of  clocks  must  be  main- 
tained for  outside  work,  so  that  the  workman  may  register 
where  he  is  working. 

When  it  is  desired  to  shift  a  workman  from  one  place  to 
another  a  notice  to  register  the  next  muster  at  a  designated 
station  is  placed  on  his  number  at  the  clock  and  his  muster 
card  is  placed  at  the  new  station. 

The  payroll  is  made  up  by  the  time  section  from  the  muster 
cards  as  registered  by  the  clocks.  The  cost  records  are  made 
up  separately  by  the  cost  section  from  the  service  cards.  The 
daily  charges  to  jobs  as  taken  from  the  service  cards  must 
check  with  the  total  daily  payroll  entries  from  the  muster 
cards. 

In  plants  where  the  work  is  not  widely  scattered  or  where 
the  number  of  workmen  is  small,  the  use  of  brass  checks  at 
the  entrance  gate  may  be  dispensed  with,  as  the  clock  muster 
will  fill  all  requirements. 

RECORD  OF  LABOR   CHARGES. 

The  time  of  all  employees  must  be  charged  to  either  a  pro- 
duction-job order  or  an  expense  order.  This  should  be  done 
by  means  of  the  service  card.  On  these  are  given  the  job-order 
number,  a  brief  statement  of  the  work,  the  workman's  name, 


PRODUCTION    ORDER    AND    COST    SECTION    RECORDS  63 

check  number  and  rate  of  pay,  the  hour  of  beginning  and  stop- 
ping the  work  and  the  time  employed.  There  is  a  separate 
card  for  each  job  and  new  cards  each  day.  The  cards  of  the 
day  are  sent  each  night  to  the  main  office ;  when  work  is  not 
completed  the  card  is  marked  "  not  finished  "  and  a  new  dupli- 
cate card  is  made  out  for  the  next  day. 

These  cards  should  be  made  out  for  the  workmen,  except 
for  the  time  of  starting  and  stopping  a  job,  and  these  times 
should  be  recorded  by  the  workmen  with  the  registering  clocks. 
The  cards  should  be  examined  by  the  sub-foreman  in  charge 
and  if  correct  should  be  initialed  by  him. 

Jobs  of  work  and  the  corresponding  card  should  always  be 
kept  ahead  of  each  workman,  so  that  there  will  be  no  delays 
on  account  of  waiting  for  work.  In  small  shops  where  there 
is  no  routing  system,  the  service  cards  may  be  made  out  by 
the  workman.  A  service  card  of  a  different  color  should  be 
used  for  over-time  work. 

In  the  main  office  the  cards  of  each  shop,  trade  or  depart- 
ment are  sorted  by  job  numbers,  and  the  charge  for  labor 
for  the  day  for  the  shop,  trade  or  department  is  transferred 
to  the  job-order  card,  which  is  described  below.  The  service 
cards  are  filed  by  job-order  numbers. 

RECORD    OF    MATERIAL    CHARGES. 

Material  is  obtained  by  means  of  requisitions  on  the  store- 
keeper. A  separate  requisition  is  made  for  each  job  num- 
ber, in  triplicate,  one  copy  being  retained  by  the  shop  as  a 
record  and  also  for  checking  material  when  received,  and  two 
copies  go  to  the  storekeeper.  The  prices  are  entered  on  these, 
and  one  is  sent  to  the  cost  department,  the  other  being  retained 
by  the  store  as  a  voucher  for  the  issue. 

Miscellaneous  minor  material  is  obtained  from  the  shop 
store  on  minor-material  slips.  Once  a  week  these  are  col- 
lected by  job  numbers,  and  regular  requisitions  in  duplicate 
are  sent  to  the  storekeeper  to  cover  the  issues.  These  are 
priced  and  sent  to  the  cost  department.  This  method  allows 
miscellaneous  minor  material  to  be  secured  without  delay  and 


64  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

also  reduces  the  paper  work  by  making  but  one  requisition 
for  a  number  of  small  items  required  during  the  week. 

Material  drawn  out  for  a  job  but  not  used  must  be  credited 
to  the  job.  This  is  done  by  returning  the  material  to  store 
with  a  credit  requisition.  The  same  form  is  used  for  credit 
material  as  for  material  drawn,  except  that  the  requisition 
has  written  across  its  face,  ''  Credit  Material."  The  material 
is  taken  up  on  the  books  of  the  storekeeper,  the  requisition 
is  priced  and  a  copy  sent  to  the  cost  department  and  is  en- 
tered as  credit  material  on  the  cost-of-work  card.  If  the 
excess  material  can  be  used  on  another  job  in  the  shop,  the 
credit  requisition  sent  to  the  storekeeper  is  accompanied  by 
a  regular  requisition  charging  the  same  material  to  the  new 
job  and  the  material  is  retained  in  the  shop. 

LABOR    AND    MATERIAL    CHARGED    TO    EXPENSE    ORDERS. 

Charges  for  labor  and  material  to  the  expense  orders  are 
made  exactly  as  for  production  orders,  as  outlined  above. 
The  charges  for  supervisory  force,  general  labor,  issuing 
tools,  grinding  tools,  small  repairs,  and  miscellaneous  material 
are  made  without  any  special  orders,  and  are  charged  to 
standing  expense  orders  which  will  be  given  later. 

Large  repairs,  while  chargeable  to  the  expense  accounts, 
vShould  be  made  to  special  expense  orders  in  order  that  the 
cost  of  each  job  may  be  ascertained.  These  charges  are 
transferred  at  the  end  of  the  month  to  the  proper  expense 
account  and  are  distributed  to  the  production  orders  with  the 
other  expenses. 

COST    SECTION    RECORDS. 

The  cost  section  receives  each  day  the  service  cards  show- 
ing the  distribution  of  labor  to  each  production  order  and  each 
expense  order,  and  receives  from  the  storekeeper  the  priced 
requisitions  of  material  issued  for  each  order. 

To  record  these  there  are  required  for  each  order,  whether 
production  or  expense,  a  *'  job  order  "  card,  a  ''  cost  of  work  " 
card,    and    a    ''  summary    of    material    requisitions  "    card. 


PRODUCTION    ORDER    AND    COST    SECTION    RECORDS  65 

With  these  three  sets  of  cards  the  costs  can  be  kept  with  a 
small  amount  of  clerical  labor,  and  in  a  way  that  will  give  the 
manager  the  information  that  he  requires. 

JOB-ORDER    CARD. 

By  means  of  the  job-order  cards  the  direct  labor  expendi- 
tures are  distributed  daily  to  the  various  orders  by  shops, 
trades  or  departments,  as  desired.  The  card  is  ruled  in  con- 
venient form  to  show  under  each  shop,  trade  or  department 
the  daily  expenditures  for  direct  labor  and  the  total  to  date, 
and  also  the  estimated  cost  of  the  work.  A  convenient  form 
for  this  purpose  is  shown  in  Figs.  5  and  6. 

The  expenditures  in  each  shop  are  taken  from  the  service 
cards  and  entered  on  the  job-order  card.  At  the  end  of  the 
month  the  total  labor  expenditure  in  each  shop  is  entered  in 
the  next  to  the  last  column  of  the  job-order  card.  With  the 
expense  rates  for  each  shop  the  indirect  charges  are  entered 
for  each  shop  in  the  last  column  and  the  total  indirect  charges 
determined,  and  these  are  transferred,  together  with  the  total 
direct-labor  charges,  to  the  cost-of-work  card. 

The  information  given  on  the  job-order  cards  can  be  made 
of  much  value.  In  my  work  I  have  required  that  these  cards 
be  delivered  each  afternoon  at  four  o'clock  to  the  assistant 
naval  constructor  in  general  charge  of  the  work,  and  by  means 
of  the  information  thus  obtained  he  is  able,  as  described  in 
a  previous  chapter,  to  keep  in  close  touch  with  the  work  and 
the  daily  charges.  The  cards  are  collected  at  eight  o'clock 
the  next  morning  and  returned  to  the  cost  section. 

COST    FIGURES    SHOULD    BE   USED,    AND    NOT    TREATED   AS    MERE 

RECORDS. 

At  this  time  I  wish  to  point  out  that  there  is  always 
strenuous  objection  from  a  cost  department  to  any  system 
or  scheme  which  will  take  records  from  the  files  of  that  de- 
partment. It  will  be  stated  that  records  will  be  lost  and  that 
such  a  system  will  greatly  interfere  with  the  work  of  the  cost 
department. 


66 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


£     o 

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to 

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Estimate                                                      Appropriatioi 
191    Labor  $               M'aterial                Indirect                       Tot«i  ?                        Job  Or^er  No 

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PRODUCTION    ORDER    AND  'COST    SECTION    RECORDS  67 

Here  again  the  Important  objective  is  forgotten  or  over- 
shadowed by  unimportant  or  petty  details.  Far  too  often 
the  cost  department  sees  only  the  importance  of  the  costs  as 
records,  and  the  importance  of  these  records  in  carrying  out 
the  real  work  of  the  factory  is  not  realized.  Unfortunately 
in  the  great  majority  of  cases  the  influence  of  the  cost  de- 
partment is  such  that  its  ideas  prevail,  and  the  records  of  cost 
might  as  well  be  kept  in  sealed  glass  cases  for  all  the  good 
they  do  in  giving  information  to  those  who  are  directly  re- 
sponsible for  the  work  and  its  cost. 

There  is  no  reason  why  the  record  cards  should  be  lost, 
but  even  if,  a  card  should  be  lost  now  and  then,  new  cards 
can  be  made  with  but  little  clerical  labor.  It  may  not  please 
the  cost  section,  but  what  does  it  matter  if  the  cards  become 
"dog-eared"  and  dirty;  it  only  shows  that  they  are  serving 
their  legitimate  purpose. 

The  manager  should  hold  the  cost  department  with  a  firm 
hand  and  make  that  department  understand  that  its  principal 
duty  is  to  furnish  information  to  the  superintendents,  heads 
of  departments,  and  foremen. 

Everywhere  there  is  the  same  complaint  from  the  factory 
proper  of  difficulty  in  obtaining  promptly  information  from 
the  cost  department,  and  in  the  majority  of  places  those  who 
are  responsible  for  the  work  have  ceased  to  struggle  for  in- 
formation regarding  costs. 

Usually  the  costs  are  records,  and  nothing  but  records, 
and  are  but  little  more  value  than  waste  paper  so  far  as  giv- 
ing assistance  in  the  efficient  production  of  the  work. 

THE    COST-OF-WORK    CARD. 

A  convenient  form  for  the  cost-of-work  card  is  shown  in 
Fig.  7.  On  this  card  there  are  entered  each  month,  the  direct 
labor  and  the  indirect  charges  for  the  month,  which  are  ob- 
tained from  the  job-order  card,  and  the  totals  to  the  end  of 
the  month ;  the  material  cost  for  the  month,  which  includes 
storehouse  expense,  and  the  net  total  cost  of  material,  which 
includes  deductions  for  "  credit  material,"  which  data  are  ob- 


68 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


tained  from  the  summary-of-material-requisition  cards.  The 
cost-of-work  cards  not  only  show  current  monthly  charges 
under  the  three  heads,  labor,  material  and  indirect  charges, 


•3 

- 

1 

o 
■3 

1 

i 
1 

Fiscal  Year  191                                  | 

I 

Cost  per  Month 

Total  Coet  Including  Month   | 

Labor 

Material 

Indireot 

Total 

Labor 

Material 

Indirect 

Total     1 

July 

Aug. 

2? 

Sep. 

mi 
i 

Oct. 

No». 

Deo. 

g 

Jan. 

Feb. 

Mar. 

Apr. 

'% 

May 

U^        ii 

June 

A 

j 

& 

< 

Fig.  7.     Cost  of  Work  Card,  Front.    Back  is  similar,  but  without  the 

order  brief. 

but  also  show  the  total  cost  to  the  end  of  the  month  under 
each  of  these  heads.  The  estimated  cost  of  the  work  is  also 
given  on  this  card. 


SUMMARY    OF    MATERIAL   REQUISITIONS. 

The  priced  requisitions  for  material  are  received  by  the 
cost  section  from  the  storekeeper  as  the  issues  are  made. 
At  the  end  of  the  month  the  requisitions  for  the  month  are 
clipped  together,  and  the  total  of  the  issues  made  up.  On 
the  "  Summary  of  Material  Requisitions  "  card.  Fig.  8,  the 
numbers  of  the  requisitions  and  the  value  of  the  monthly 
issue  are  entered.  The  storehouse  expense  percentage  is  ap- 
plied and  the  total  cost  of  the  material  determined.  To  this 
is  added  the  prior  cost,  and  the  credit  material  is  subtracted, 
giving  the  total  net  cost  of  material  to  the  end  of  the  month. 
No  allowance  or  credit  for  storehouse  expense  is  made  on 
returned  material. 

The  value  of  the  monthly  issues  and  also  the  total  material 
cost  to  the  end  of  the  month  are  transferred  to  the  cost-of- 


PRODUCTION    ORDER    AND    COST    SECTION    RECORDS 


69 


work   card.     The   material   requisitions   clipped   together   by 
rnonths  are  filed  with  the  summary  card. 

At  the  end  of  each  month  the  storekeeper  furnishes  the 
cost  department  with  a  summary  of  the  material  issued  during 
the  month  and  the  total  of  the  material  charged  must  check 
with  the  total  given  on  the  summary. 


1 1 

111 

1  1§ 

a     1  « 

^  !^ 

S    ! 
Q    ! 

0 

'§ 

<-» 

EequisitionCoBt 

July 

Aug. 

Sep. 

Oct. 

Nov. 

Dec. 

Store  Expenses..      ___% 

Cost  per  Month 

Previous  Cost 

Total 

Credit  Material 

Cost  to  end  Month 

EequisitionCost 

Jan. 

Feb. 

Mar. 

Apr. 

May. 

June 

Store  Expenses          _   .% 

Coat  per  Month 

Previous  Cost 

Total 

Credit  Material 

Cost  to  end  Month 

Fig.  8.     Summary  of  Material  Requisitions  Record  Card. 

It  will  be  noted  that  but  little  clerical  work  is  required 
in  recording  the  material  to  be  charged  to  each  job.  There 
is  no  copying  of  material  items;  the  original  requisitions 
serve  for  checking  the  materials  in  the  shop,  for  a  voucher 
to  the  storekeeper  for  the  issue,  and  also  as  a  cost  record. 
If  it  is  desired  to  know  in  detail  the  material  charged  to  a 
job  the  original  requisitions  filed  with  the  summary  card 
give  this ;  if  only  the  value  is  required,  it  is  shown  on  the  cost- 
of-work  card. 


ADVANTAGES   AND   DISADVANTAGES. 

The  job-order  card  shows  the  expenditures  for  direct  labor 
day  by  day,  and  can  be  checked  each  day  as  the  work  pro- 
gresses. The  cost-of-work  card  shows  the  total  expenditures 
month  by  month,  but  gives  no  details  of  labor  or  material. 
If  these  are   required  the   job-order   card   and   the   material 


70  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

requisitions  must  be  consulted.  If  it  is  desired  to  obtain 
the  cost  to  date  of  a  job  at  any  time  except  the  end  of  the 
month,  this  cannot  be  done  directly ;  it  is  necessary  to  take 
from  the  cost-of-work  card  the  cost  to  the  beginning  of  the 
month  and  add  the  following:  direct  labor  from  the  job-order 
card  and  the  estimated  indirect  charges,  direct  material  from 
the  current  month's  requisitions  plus  the  percentage  of  store- 
house expense.     This,  however,  can  be  done  very  quickly. 

Any  system  which  requires  daily  entries  to  the  cost-of- 
work  card  for  labor  and  material  involves  a  large  amount 
of  clerical  work,  and  also  requires  a  large  and  unhandy 
record  card.  The  system  described  is  very  simple,  requires 
but  little  clerical  work,  and  will  give  very  satisfactory  re- 
sults. 


CHAPTER  VI 

Indirect  Charges 

The  indirect  charges  will  bb  taken  up  under  general  ex- 
pense; shop  expense;  power,  heat  and  light;  storehouse  ex- 
pense; part  plant  development;  selling  expense. 

Each  shop  will  be  designated  by  a  letter,  as  "  B  "  for  the 
boat  shop,  "  M  "  for  the  machine  shop,  "  S  "  for  the  smith 
shop,  "  P  "  for  the  pattern  shop,  etc.  The  letter  "  G  "  will 
designate  general  expense,  and  "  S  "  will  be  the  symbol  for 
shop  expense.  The  letter  "  G  "  followed  by  other  symbols 
will  designate  the  various  general  expense  accounts,  while 
the  letter  "  S "  followed  by  other  symbols  designates  the 
various  shop  expense  accounts.  For  example,  "  SB  "  is  the 
designation  for  the  shop  expense  account  of  the  boat  shop, 
"  SM  "  for  the  machine  shop,  "  SS  "  for  the  smith  shop, 
"  SP "  for  the  pattern  shop,  etc.  The  subdivisions  under 
each  of  the  general  heads  will  be  designated  by  additional 
letters,  as  "  SMA "  supervisory  force  of  machine  shop, 
"  SMD "  dressing  and  grinding  machine  shop  tools,  etc. 
The  symbols  used  for  a  subdivision  should  be  the  same  in 
all  shops ;  for  example,  "  D  "  is  the  symbol  selected  for  dress- 
ing and  grinding  tools  and  "  SMD  "  is  the  charge  symbol  for 
dressing  and  grinding  machine  shop  tools,  then  "  SSD  "  should 
be  the  charge  symbol  for  dressing  and  grinding  smith  shop 
tools,  and  "  SPD  "  for  the  pattern  shop,  etc. 

G GENERAL    EXPENSE. 

Includes  salaries  of  general  officers  and  main-office  expense, 
except  those  chargeable  to  selling  expense  and  storehouse 
expense.  Includes  fixed  charges  that  cannot  be  located 
against  a  shop  or  department.     Includes  labor  and  material 

71 


^2  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

expended  for  the  repair  and  maintenance  of  buildings  and 
equipment  which  cannot  be  located  against  a  shop  or  depart- 
ment. Covers  all  expenditures,  the  details  of  which  are  given 
below  under  the  subheads: 

GA  Salaries  of  general  officers  and  assistants,  excluding 
storehouse  and  sales  department. 

GB  Office  salaries ;  Salaries  of  clerks,  messengers,  stenog- 
raphers, janitors  and  others  employed  in  the  general  office. 
Does  not  include  any  salaries  in  storehouse  or  sales  de- 
partment. 

GC  Cleaning  and  care  of  yard  outside  of  shops:  Labor 
and  material  expended  in  cleaning  yard.  Includes  cost 
of  men  driving  teams  for  cleaning  purposes,  but  does  not 
include  any  general  stable  expense. 

GD  Drawing  office:  Salaries  of  chief  draftsmen  and 
others  in  -  drawing  office  when  not  chargeable  direct  to 
output;  all  drawing-office  material;  details  given  under 
subheads.  No  charges  are  made  direct  to  GD,  but  must 
be  made  to  subhead  symbols. 

GE  Experiments  for  the  benefit  of  engineering  or  manu- 
facturing: Includes  labor  and  material  required  to  make 
experimeiits  for  the  benefit  of  the  economical  administra- 
tion orahe  plant,  but  does  not  include  costs  of  experi- 
ments for  the  benefit  of  a  production  order,  which  should 
be  charged  direct.  No  charges  will  be  made  to  this  num- 
ber except  by  order  from  the  office. 

GG  Repairs  and  maintenance  of  floating  property:  In- 
cludes labor  and  material  expended  in  the  repair  and 
maintenance  of  floating  property,  such  as  pile  drivers, 
dredges,  floats,  barges,  derricks  and  launches. 

GH  Hauling,  handling  stores  and  shipments:  The  cost  of 
hauling  and  handling  material  from  shop  to  shop  when 
impracticable  to  make  charges  direct  to  production  or- 
ders. The  cost  of  boxing  and  handling  for  shipment 
and  cost  of  outgoing  freight  when  impracticable  to  charge 
direct   to   production    orders.     Does    not   include    hauling 


INDIRECT    CHARGES  73 

and,  handling  material  for  storehouse  which  should  be 
charged  to  storehouse  expense.  Does  not  include  cost  of 
railway  freight  service. 

GI  Stable  expense:  Includes  expense  of  upkeep  of  horses, 
wagons,  etc.  Drivers  should  be  charged  to  production 
orders  or  to  other  expense  orders. 

GJ     Legal  expense. 

GK     Dues  and  assessments  for  associations  and  societies. 

GL  Leave  and  holidays:  Includes  pay  for  officers  and  oth- 
ers for  holidays  given  with  pay. 

GM.     Patents :     Cost  of  obtaining  and  keeping  alive. 

GN  Telephone  and  telegraph :  Includes  all  expenses  in- 
curred for  telephone  and  telegraph,  which  are  not  charge- 
able to  storehouse  or  sales  department.  Includes  re- 
pairs, maintenance  and  operation  of  yard  telephone  service. 

GO  General  office  fixtures  and  furniture :  Labor  and  ma- 
terial for  repairs  to  fixtures  and  furniture  in  general 
offices,  not  including  drawing  office,  storehouse  or  sales 
department.  Includes  repairs  to  desks,  cabinets,  carpets, 
clocks,  bells,  safes,  calculating  machines,  window  shades, 
file  cases,  etc. 

GP  Plant  repairs  outside  of  shops :  Labor  and  material 
for  repair  of  machinery  and  equipment  outside  of  shops, 
or  which  is  not  for  the  use  of  a  single  shop.  Includes 
cranes,  derricks  (not  floating),  locomotives,  locomotive 
cranes,  railroad  equipment  (not  including  tracks),  etc. 
Does  not  include  labor  and  material  for  running  these  ap- 
pliances. Repairs  estimated  to  exceed  $ioo  will  be  made 
on  special  orders  and  charged  to  this  account.  These 
orders  will  carry  no  indirect  charges; 

GQ  Operation  of  plant  equipment  outside  of  shops:  Labor 
and  material  for  the  operation  of  railway  service,  loco- 
motive cranes,  derricks,  cranes  and  launches  when  it  is 
impracticable  to  make  charges  direct  to  production  orders. 

GR  Roads,  railway  tracks,  wharves,  and  general  yard  re- 
pairs :  Labor  and  material  for  repair  and  maintenance 
of   walks,    roads,   subways,    railroad   tracks,    plate   racks, 


74  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

piers  and  wharves,  sewers,  fire  protection  system  (not 
including  water  system),  fences,  weighing  apparatus,  etc. 
Repairs  estimated  to  exceed  $ioo  will  be  made  to  special 
orders  and  charged  to  this  account.  These  orders  will 
carry  no  indirect  charges. 

GS  Office  supplies  and  postage:  Includes  all  supplies  re- 
quired for  the  general  offices,  not  including  shop,  draw- 
ing room,  storehouse,  or  sales  department  offices.  In- 
cludes books,  stationery,  postage,  newspaper  and  maga- 
zine subscriptions,  etc. 

GT  Traveling  expenses:  Traveling  expenses  not  chargea- 
ble to  a  particular  product  and  not  for  the  benefit  of  sales. 

GU     

GV  Miscellaneous :  To  cover  cost  of  miscellaneous  special 
expenses,  such  as  bad  debts,  entertaining,  etc.  No  charges 
to  be  made  to  this  number  without  an  order  from  the  man- 
ager. 

GW  Watchmen:  Labor  and  material  for  watchman  serv- 
ice. 

GX  Part  plant  development:  One-half  of  cost  of  charges 
made  under  "  XG  "  orders  which  are  not  chargeable  to  any 
shop  or  department. 

GY     

GZ  Repairs  and  maintenance  of  buildings :  Labor  and  ma- 
terial expended  for  repairs  to  buildings,  crane  runways, 
lavatories  outside  of  shops,  wiring  and  lights  main  of- 
fice, etc.,  which  are  not  chargeable  to  shop  expense  or 
storehouse  expense.  Repairs  estimated  to  exceed  $ioo 
will  be  made  on  special  orders  and  charged  to  this  account. 
These  orders  will  not  carry  any  indirect  expense. 

GF  Fixed  charges:  Such  as  interest,  depreciation,  taxes, 
insurance,  not  chargeable  to  shops  or  departments,  as  per 
subheads  given  below : 

GFD     Depreciation  not  chargeable  to  a  shop  or  de- 
partment. 
GFF     Fire  and  accident  insurance  not  chargeable  to 
a  shop  or  department. 


INDIRECT    CHARGES  75 

GFI  Interest  on  investment  not  chargeable  to  a  shop 
or  department. 

GFN  Indemnity  insurance  not  chargeable  to  a  shop 
or  department. 

GFT  Taxes  not  chargeable  to  a  shop  or  department. 
GD     Drawing  Office : 

GDA  Miscellaneous  wages:  Includes  the  pay  of 
chief  draftsman  and  leading  draftsmen  and  those 
stowing  and  recording  plans;  includes  pay  of 
blueprinters ;  includes  the  pay  of  all  draftsmen 
who  cannot  be  charged  to  production  orders,  or 
to  the  estimating  department. 

GDB  Fixtures  and  furniture:  Includes  labor  and 
material  expended  for  repairs  and  maintenance  of 
drawing  tables,  fixtures  and  furniture,  and  draw- 
ing instruments. 

GDC  Wages  of  estimating  department :  Includes  the 
pay  of  the  estimating  department  and  draftsmen  en- 
gaged on  estimates  when  these  charges  cannot  be 
made  direct  to  production  orders  or  to  the  sales 
department. 

GDS  Stores  and  supplies:  Includes  all  stores  and 
supplies,  such  as  ink,  paper,  tracing  cloth,  station- 
ery, etc.,  used  in  the  drawing  office  and  estimating 
department. 

S SHOP    EXPENSE. 

The  subdivision  of  the  shop  expense  accounts  for  the  dif- 
ferent shops  is  very  similar,  and  to  save  space  those  of  but 
one  shop,  the  machine  shop,  will  be  given. 

SM     Shop  Expense,  Machine  Shop: 

SMA  Supervisory  and  office  force:  Includes  wages 
paid  to  foremen,  assistant  foremen,  and  all  men 
acting  in  a  supervisory  capacity.  Includes  the  pay 
of  planners,  clerks,  messengers  and  others  employed 
in  the  shop  office. 


76  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

SMB  Miscellaneous  labor:  Wages  which  it  is  im- 
practicable to  charge  to  production  orders,  such 
as  shop  cleaners,  crane  operators,  move  men,  gen- 
eral floor  helpers,  etc.,  but  does  not  include  any 
labor  that  can  be  charged  to  other  SM  orders. 

SMC  Fixtures  and  furniture:  Labor  and  material 
for  repair  and  maintenance  of  fixtures  and  fur- 
niture, both  fixed  and  movable,  such  as  benches, 
shelving,  desks,  stools,  clocks,  bells,  trays,  tote 
boxes,  hand  carts,  etc.  Any  changes  or  additions 
will  only  be  made  on  order  from  the  office.  Re- 
pairs estimated  to  exceed  $50  will  be  made  on  spe- 
cial orders  and  charged  to  this  account.  These 
orders  will  not  carry  indirect  charges. 

SMD  Dressing  and  grinding  old  tools:  Includes 
the  dressing  and  grinding  of  old  tools  only  and 
the  transportation  to  and  from  the  shop.  The 
dressing  and  grinding  of  new  tools  is  not  included 
in  this  order,  this  work  being  charged  to  the  order 
for  the  manufacture  of  the  tools.  Charges  are 
to  be  made  against  the  shop  using  the  tools  and 
not  against  the  shop  doing  the  work. 

SME  Maintenance  of  small  and  loose  tool  equip- 
ment: Repair  of  large  loose  tools,  such  as  vises, 
hydraulic  jacks,  pulley  blocks,  anvils,  etc.  Re- 
pairs to  pneumatic  tools  and  pneumatic  hoists  are 
not  to  be  charged  to  this  order.  Includes  repair 
(not  dressing  and  grinding)  of  small  tools;  in- 
cludes the  purchase  or  manufacture  of  such  tools, 
as  drills,  chisels,  files,  milling  cutters,  taps,  dies, 
planer,  lathe  and  shaper  tools,  etc.,  when  such 
tools  merely  maintain  and  do  not  increase  the  tool- 
room stock.  Tools  that  increase  the  stock  will  be 
supplied  on  written  orders  from  the  main  office 
and  charged  to  XM  orders.  Charges  must  be 
made  to  the  shop  that  is  to  use  the  tools  and  not 
to  the  shop  that  does  the  work. 


INDIRECT    CHARGES  7/ 

SMG  Special  tools :  Repairs  and  maintenance  of 
jigs,  dies,  gauges,  templets,  etc.  Only  covers  re- 
pairs and  replacements  and  not  additions.  Charges 
are  to  be  made  to  the  shop  which  is  to  use  the 
tools  and  not  against  the  shop  that  does  the  work. 
Repairs  estimated  to  exceed  $ioo  will  be  made  on 
special  orders  and  charged  to  this  account.  These 
orders  will  not  carry  indirect  charges. 

SMH  Pneumatic  tools  and  hose :  Repair  and  main- 
tenance of  the  pneumatic  tools  for  the  machine 
shop  and  machine  shop  force  working  outside  of 
the  shop,  such  as  drills,  hammers,  and  air  motors 
for  driving  boring  bars.  Includes  cost  of  air  hose 
for  machine  shop.  Does  not  include  pneumatic 
hoists,  which  are  chargeable  to  SMK. 

SMI  Belting:  Repairs  and  maintenance  of  belting. 
Includes  new  belting  for  replacing  old,  belt 
lacing,  glue,  tools,  etc.  Charges  for  new  belting 
with  new  equipment  are  to  be  made  to  specific  or- 
ders. 

SMJ  Power  transmission:  Includes  labor  and  ma- 
terial for  the  maintenance,  repair  and  operation  of 
line  shafting,  countershafting,  piping  and  wiring 
inside  of  shops  for  the  transmission  of  power.  In- 
cludes motors  not  forming  a  part  of  a  machine 
tool,  includes  electric  controllers  not  forming  a 
part  of  a  machine  tool.  Does  not  include  belting. 
Does  not  include  repairs  to  light  wiring  nor  radia- 
tors. Repairs  estimated  to  exceed  $ioo  will  be 
made  on  special  orders  and  charged  to  this  ac- 
count. These  orders  will  not  carry  indirect 
charges. 

SMK  Cranes,  hoists  and  elevators:  Includes  labor 
and  material  for  repairs  and  maintenance  of  cranes, 
hoists  and  elevators.  Includes  pneumatic  hoists. 
Does  not  include  cost  of  operation.  Repairs  es- 
timated to  exceed  $ioo  will  be  made  on  special  or- 


^8  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

ders  and  charged  to  this  account.     These  orders 
will  not  carry  indirect  charges. 
SML     

SMM  Repairs  to  machine  tools:  Includes  labor 
and  material  for  repairs  to  machine  tools.  Where 
motors  are  direct  connected  and  form  a  part  of 
the  machine,  repairs  to  motors  and  controllers  will 
be  charged  to  this  order.  Repairs  estimated  to 
exceed  $ioo  will  be  made  on  special  orders  and 
charged  to  this  account.  These  orders  will  not 
carry   indirect  charges. 

SMN     

SMO     

SMP  Power,  heat  and  light:  Monthly  cost  or  pro- 
portionate share  of  power,  heat  and  light.  No 
charges  will  be  made  direct  to  this  order.  At  the 
end  of  each  month  the  cost  of  machine-shop  power 
will  be  transferred  from  the  power  account  to  this 
account. 

SMR  Correction  of  errors:  Labor  and  material  re- 
quired to  correct  errors  made  by  the  machine  shop. 
All  errors  must  be  reported  and  the  correction 
charged  to  this  number.  Correction  of  errors  es- 
timated to  cost  in  excess  of  $50  will  be  done  on 
special  orders  and  charged  to  this  account.  These 
orders  will  carry  no  indirect  charges. 

SMS  General  stores  and  supplies:  Includes  mis- 
cellaneous material,  such  as  waste,  oil,  brooms, 
etc.,  for  the  use  of  the  shop.  Also  material  used 
on  output  which,  on  account  of  its  character  and 
the  small  quantities  used  on  each  job,  cannot  be 
charged  direct. 

SMT  Operations  of  tool  room:  Includes  wages  of 
men  working  in  the  tool  issue  room,  also  the  tool 
boys.  Does  not  include  labor  of  toolmakers, 
which  should  be  charged  to  work  on  which  en- 
gaged. 


INDIRECT    CHARGES  79 

SMX  Part  plant  development:  Monthly  charges 
for  one-half  the  part  plant  development  charges 
for  the  benefit  of  the  machine  shop.  No  charges 
are  made  direct  to  this  order.  At  the  end  of  each 
month  one-half  of  the  charges  against  XM  orders 
are  transferred  to  this  account. 
SMZ  Repairs  and  maintenance  of  buildings:  In- 
cludes labor  and  material  expended  in  the  repair 
and  maintenance  of  machine-shop  buildings,  crane 
runways,  foundations  for  machine  shops,  inside 
drains  and  sewers,  lavatories  in  shop,  plumbing, 
radiators  in  shop,  light  wiring  in  shop,  globes, 
lamps  and  carbons.  Repairs  estimated  to  exceed 
$ioo  will  be  done  on  special  orders  and  charged  to 
this  account.  These  orders  will  carry  no  indirect 
charges. 
SMF  Machine-shop  fixed  charges :  As  given  in  sub- 
heads which   follow: 

SMFD     Depreciation   of   machine-shop   build- 
ings, machinery,  equipment  and  tools. 
SMFF     Fire   and   accident   insurance   on   ma- 
chine-shop buildings  and  equipment. 
SMFI     Interest  on  money  invested  in  machine- 
shop  land,  buildings  and  equipment. 
SMFN     Indemnity     insurance     for     machine- 
shop  force. 
SMFT     Taxes   on   machine-shop   land,    build- 
ings and  equipment. 

P POWER,    HEAT    AND    LIGHT. 

\  Power-house  labor:  All  labor  connected  with  the  op- 
eration of  boilers,  engines,  generators,  air  compressors 
and  other  power  machinery.  Includes  salary  of  engineer 
in  charge.  Does  not  include  labor  or  repairs  except  when 
repairs  are  made  by  the  regular  power-house  attendants. 
Does  not  include  repairs  and  attendance  of  wiring  and 
piping  outside  of  power  station  for  the  transmission  of 
power. 


8o  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

PB  Repairs  to  boilers:  Labor  and  material  for  repairs  to 
boilers,  uptakes,  stacks,  boiler  fittings,  injectors,  feed 
pumps,  water  heaters,  coal  and  ash-handling  apparatus, 
or  oil  pumps  and  burners.  Repairs  estimated  to  exceed 
$ioo  will  be  made  on  special  orders  and  charged  to  this 
account.     These  orders  will  not  carry  indirect  charges. 

PC  Repairs  to  air  compressors :  Labor  and  material  for 
repairs  to  compressors,  intercoolers  and  outercoolers. 
Repairs  estimated  to  exceed  $ioo  will  be  made  on  special 
orders  and  charged  to  this  account.  These  orders  will 
not  carry  indirect  charges. 

PD  Distributing  system,  electric:  Labor  and  material  for 
repairs  and  attendance  on  electrical  distributing  system 
outside  of  power  plants  and  outside  of  shops.  Includes 
wiring,  poles,  static  transformers,  conduits  and  lamps  out- 
side of  shops.  Repairs  estimated  to  cost  in  excess  of 
$ioo  will  be  made  on  special  orders  and  charged  to  this 
account.     These  orders  will  not  carry  indirect  charges. 

PE  Repairs  to  electric  generators,  switchboard  and  wiring 
inside  of  power  station:  Labor  and  material  for  repairs 
to  electric  generators  and  engines  driving  same,  switch- 
board, and  wiring  inside  of  power  house.  Repairs  esti- 
mated to  cost  in  excess  of  $ioo  will  be  made  on  special 
orders  and  charged  to  this  account.  These  orders  will  not 
carry  indirect  charges. 

PF  Power-house  fuel:  Cost  of  fuel,  including  labor  for 
handling  same.     Cost  of  removing  ashes. 

PG  Distributing  system,  steam:  Labor  and  material  for 
repairs  and  attendance  for  the  steam-distributing  system,  in- 
cluding heating  lines,  from  power  house  to  shops.  Repairs 
estimated  to  exceed  $ioo  will  be  made  on  special  orders 
and  charged  to  this  account.  These  orders  will  carry  no 
indirect  charges. 

PH  Repairs  to  hydraulic  machinery:  Labor  and  material 
for  repairs  to  hydraulic  pumps  and  motors  driving  same, 
and  accumulators.     Repairs  costing  in  excess  of  $ioo  will 


INDlRECT"^  CHARGES  8 1 

be  made  on  special  orders  and  charged  to  this  account. 
These  orders  will  not  carry  indirect  charges. 

PI  Distributing  system,  hydraulic :  Labor  and  material  for 
repairs  and  attendance  for  the  hydraulic  distributing  sys- 
tem from  power  house  to  shops.  Includes  accumulators 
outside  of  power  plant.  Repairs  estimated  to  cost  in  ex- 
cess of  $ioo  will  be  made  on  special  orders  and  charged 
to  this  account.  These  orders  will  not  carry  indirect 
charges. 

PM  Repairs  to  miscellaneous  machinery.  Labor  and  ma- 
terial for  repairs  to  miscellaneous  machinery  not  included 
under  other  numbers,  such  as  condensers,  air  pumps, 
cranes,  motors,  transformers  and  other  auxiliary  machin- 
ery. Repairs  estimated  to  cost  in  excess  of  $ioo  will  be 
made  on  special  orders  and  charged  to  this  account.  These 
orders  will  not  carry  indirect  charges. 

PN  Distributing  system,  pneumatic:  Labor  and  material 
for  repairs  and  attendance  on  pneumatic  distributing  sys- 
tem from  the  power  house  to  the  shops.  Includes  supply 
of  hose  and  portable  pipe  lines  run  for  the  benefit  of 
several  shops  or  a  number  of  different  jobs.  Includes 
cost  of  inspectors  for  waste  of  air  and  abuse  of  air  tools. 
Repairs  estimated  to  cost  in  excess  of  $ioo  will  be  made 
on  special  orders  and  charged  to  this  account.  These  or- 
ders will  carry  no  indirect  charges. 

PO  Lubricating  oil :  Cost  of  lubricating  oil  for  power 
plant,  including  cost  of  handling. 

PP  Repairs  to  piping:  Labor  and  material  for  repairs  to 
all  piping  inside  of  power  plant.  Repairs  estimated  to 
cost  in  excess  of  $ioo  will  be  made  on  special  orders  and 
charged  to  this  account.  These  orders  will  carry  no  in- 
direct charges. 

PO  Repairs  to  water  system:  Labor  and  material  for  re- 
pairs to  water  systems  from  power  house  and  outside  of 
shops.  Does  not  include  cost  of  water  purchased,  which 
is  charged  to  PS.     Repairs  estimated  to  exceed  $ioo  will 


82  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

be  made  on  special  orders  and  charged  to  this  account. 
These  orders  will  carry  no  indirect  charges. 

PR  Fixtures,  furniture  and  tools:  Labor  and  material  for 
repair  and  maintenance  of  fixtures,  furniture  and  tools 
in  power  house,  such  as  desks,  chairs,  lockers,  shovels, 
scrapers,  flue  cleaners,  wrenches,  jacks,  etc. 

PS  Stores  and  supplies:  All  stores  and  supplies  for  power 
plant  except  fuel  and  lubricating  oils.  Includes  waste, 
packing,  stationery,  water,  brooms,  brushes,  soap,  boiler 
compounds,  etc. 

PT  Interest:  Monthly  charge  for  interest  on  money  in- 
vested in  land,  buildings,  machinery,  tools  and  equipment 
of  power  house  and  power  lines. 

PU  Depreciation :  Monthly  charge  for  depreciation  of 
buildings,  tools  and  equipment  of  power  house  and  power 
lines. 

PV  Taxes:  Monthly  charge  for  taxes  on  land,  buildings, 
tools  and  equipment  of  power  house  and  power  lines. 

PW  Insurance:  Monthly  charge  for  insurance  of  power 
plant  and  equipment. 

PY  Electric  current  purchased :  Cost  of  electric  current 
purchased  from  outside  plants. 

PZ  Repairs  and  maintenance  of  power-house  buildings: 
Includes  labor  and  material  expended  in  the  repair  and 
maintenance  of  power-house  buildings,  crane  runways, 
foundations  for  boilers,  engines  and  other  machinery, 
inside  drains  and  sewers,  lavatories,  plumbing,  radiators, 
light  wiring,  lamps  and  carbons.  Repairs  estimated  to 
cost  in  excess  of  $ioo  will  be  made  on  special  orders  and 
charged  to  this  account.  These  orders  will  carry  no  indi- 
rect charges. 

DISTRIBUTION    OF    POWER    EXPENSE. 

The  total  of  all  "P"  charges  —  power-house  expense  — 
is  each  month  distributed  to  the  various  shops  and  the  store- 
house, in  accordance  with  the  estimated  amount  of  power 
that   has   been   used   by   each.     No   distribution   is   made   to 


indirect'  CHARGES  83 

*'  general  expense,"  though  a  small  part  has  been  used  for 
heating  and  lighting  the  main  offices.  The  amounts  so  dis- 
tributed are  taken  up  in  the  proper  account  under  shop  ex- 
pense or  storehouse  expense. 

H STOREHOUSE    EXPENSE. 

HA  Salaries  of  officers  of  storehouse  and  purchasing  de- 
partment. 

HB  Salaries  of  clerks,  stenographers,  messengers  and  jani- 
tors. 

HC  Salaries  of  storehouse  labor  not  included  in  HA  and 
HB. 

HD  Handling  stores :  Labor  and  material  for  handling 
stores  to  and  from  storehouse,  not  including  regular  store 
men.  Includes  drivers  for  teams  and  operators  of  loco- 
motive cranes  when  handling  stores.  Special  orders  will 
be  issued  for  handling  quantities  of  heavy  or  bulky  ma- 
terial and  the  cost  located  direct  to  the  cost  of  the  ma- 
terial. 

HE  Inspecting  and  testing:  Labor  and  material  for  testing 
and  inspecting 'material  delivered.  Includes  cost  of  chem- 
ical analyses  and  physical  tests. 

HF  Repairs  to  fixtures  and  furniture :  Labor  and  material 
for  maintenance  of  office  and  storehouse  furniture  and 
fixtures,  including  shelving,  bells,  clocks,  elevators,  speak- 
ing tubes,  tools,  typewriters,  comptometers,  etc.  Repairs 
estimated  to  exceed  $50  will  be  made  on  special  orders 
and  charged  to  this  account.  These  orders  do  not  carry 
any  indirect  charges. 

HI  Insurance:  Monthly  charge  for  insurance  of  store- 
house buildings  and  stock. 

HJ  Depreciation  of  buildings:  Monthly  charge  for  depre- 
ciation of  storehouse  buildings.  Does  not  include  waste 
and  depreciation  of  stock. 

HK  Depreciation  and  waste  of  stock:  Monthly  charge  for 
depreciation  and  waste  of  storehouse  stock. 


84  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

HL  Interest:  Monthly  charge  for  interest  on  money  in- 
vested in  storehouse  buildings  and  stock. 

HM  Freight  and  express:  Expenses  for  incoming  freight 
and  express  when  it  is  not  practicable  to  locate  this  direct 
to  the  material.  When  practicable  the  freight  or  express 
will  be  added  to  the  purchase  price  of  the  material. 

HP  Power,  light  and  heat:  Proportionate  share  of  power- 
house expense.  No  charges  are  to  be  made  to  this  order, 
direct,  but  at  the  end  of  each  month  the  amount  charged 
will  be  transferred  to  this  account  from  the  power  ac- 
count. 

HS  Office  supplies  and  expenses:  Includes  all  office  and 
storehouse  supplies,  including  stationery,  books,  brooms, 
etc.  Includes  expense  of  telegrams,  postage  and  telephones 
for  the  benefit  of  the  storehouse. 

HT  Taxes:  Monthly  charge  for  taxes  due  to  storehouse 
land,  buildings  and  stock. 

HZ  Repairs  and  maintenance  of  storehouse  buildings:  In- 
cludes labor  and  material  expended  in  the  repair  and 
maintenance  of  storehouse  buildings,  lavatories,  plumbing, 
wiring  and  lights,  drains  and  sewers  inside  of  buildings. 
Repairs  estimated  to  exceed  $100  will  be  made  on  special 
orders  and  charged  to  this  account.  These  orders  will 
not  carry  any  indirect  charges. 

DISTRIBUTION     OF    STOREHOUSE    EXPENSE. 

No  indirect  charges  will  be  made  to  any  storehouse  orders, 
as  these  are  in  themselves  indirect  charges.  The  storehouse 
expense  will  be  distributed  on  the  basis  of  the  value  of  stores 
issued  to  the  manufacturing  department.  In  the  cost  depart- 
ment, at  the  end  of  each  month  a  percentage  will  be  added  to  the 
total  cost  of  material  drawn  from  store  during  the  month  for 
each  order.  This  percentage  is  based  on  previous  experience. 
A  loss  and  gain  account  will  be  kept,  showing  each  month  the 
total  expense  charged  to  job  orders  and  the  actual  expense, 
and  the  percentages  used  will  be  corrected  from  time  to  time 
so  as  to  keep  this  account  approximately  balanced.^ 


INDIRECT  "charges  85 

The  depreciation  of  the  storehouse  buildings  will  be  carried 
to  the  regular  depreciation  account.  The  depreciation  and 
waste  of  stock  will  be  taken  up  in  a  separate  account  which 
will  be  credited  with  losses  in  stock,  shown  by  inventory,  and 
the  account  at  the  end  of  the  year  will  be  closed  into  profit  and 
loss. 

X PART    PLANT    DEVELOPMENT. 

Includes  the  cost  of  articles  manufactured  or  purchased 
which,  while  they  add  to  the  equipment  and  increase  the  plant 
valuation,  are  of  such  a  nature  that  their  life  is  short.  These 
are  small  and  loose  tools,  pneumatic  tools,  fixtures  and  furni- 
ture, which  are  not  replacements,  but  add  to  the  stock,  also 
new  patterns,  which  cannot  be  charged  to  production  orders. 
One-half  of  the  charges  under  this  account  are  carried  each 
month  to  the  proper  shop  expense  or  to  general  expense,  and 
the  remainder  is  taken  up  under  special  capital  accounts  which 
are  eliminated  in  two  years  by  depreciation  charges.  No 
charges  will  be  made  to  part  plant  development  accounts  ex- 
cept on  specific  written  order  from  the  manager.  There 
should  be  no  standing  job  orders  under  this  account,  for  if 
used,  work  which  is  in  reality  expense  account  work  will  prob- 
ably be  charged  to  these  orders. 

Job  orders  for  work  under  this  account  are  numbered  with 
numerals  followed  with  designating  letters  showing  the  shop 
or  general  expense  account.  For  example,  the  order  for  ad- 
ditional small  tools  for  the  machine  shop  will  be  numbered 
125XM;  and  the  order  for  additional  forges  for  the  smith 
shop  will  be  numbered  126XS. 

The  part  of  the  account  which  is  taken  up  under  the  capital 
account  is  considered  as  "  output  "  of  the  factory  and  as  such 
carries  its  proportion  of  the  indirect  charges,  while  the  part 
transferred  to  the  expense  accounts,  being  itself  an  expense, 
does  not  carry  indirect  charges.  In  other  words,  one-half  of 
the  X  charges  carry  indirect  charges  and  one-half  do  not. 


86  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

PLANT   DEVELOPMENT. 

Work  done  for  plant  development  should  be  treated  as  if 
the  work  were  for  a  customer.  Output  job  orders  should  be 
issued  and  the  cost  should  include  indirect  costs.  The  total 
cost  of  each  job  or  undertaking  should  be  taken  up  under  ap- 
propriate sub-accounts  of  the  capital  account.  Care  should 
be  exercised  that  no  work  which  does  not  give  a  real  increase 
in  the  value  of  the  plant  is  considered  as  plant  development. 

E SELLING  EXPENSE. 

Includes  all  expenses  incurred  in  selling  the  product,  such 
as  salaries,  advertising,  postage,  traveling  expenses,  discounts,' 
etc.  Includes  proportion  of  fixed  charges  for  office  building. 
Includes  charges  for  services  of  estimating  department  and 
drawing  office  when  for  the  benefit  of  sales.  Details  of  the 
charges  are  given  under  the  subheads: 

EA     Salaries  of  officers  of  sales  department. 

EB     Salaries  of  salesmen. 

EC  Salaries  of  clerks,  stenographers,  messengers  and  jani- 
tors. 

ED     Discounts. 

EE  Estimates:  Expenses  due  to  the  preparation  of  plans 
and  estimates  for  the  benefit  of  sales. 

EF     Repairs  to  fixtures  and  furniture  of  sales  department. 

EG     Advertising. 

ES  Office  supplies  and  expenses :  Sales-department  office 
supplies,  including  postage,  telegrams  and  telephones. 

ET     Traveling  expenses  for  the  benefit  of  sales. 

EU  Fixed  charges :  Includes  a  monthly  charge  for  rent  of 
office  room  which  includes  depreciation,  interest,  taxes  and 
insurance. 

EV  Miscellaneous:  Includes  expenses  not  otherwise  classi- 
fied.    Such  as  entertaining,  etc. 


INDIRECT    CHARGES  87 


DISTRIBUTION    OF    SELLING    EXPENSE. 

In  a  manufacturing  establishment  the  selHng  expense  should 
each  month  be  distributed  to  the  product  sold.  The  expense 
rate  will  be  determined  by  dividing  the  total  of  the  selling  ex- 
pense by  the  value  of  the  product  sold;  each  sale  should  bear 
its  proportion  of  the  selling  cost. 

In  a  jobbing  repair  shop,  or  in  an  establishment  like  a  ship- 
yard, where  there  is  both  repair  and  construction  work  and 
where  contracts  require  several  years  to  complete,  it  is  im- 
practicable to  distribute  the  selling  expense  to  the  product  sold. 
In  these  cases  the  selling  expense  should  be  treated  as  an  ele- 
ment of  general  expense  and  distributed  with  it. 


CHAPTER  VII 
Supervision  of  the  Expense  Accounts 

the  disadvantage  of  superficial  criticism. 

The  relation  of  overhead  charges  to  total  cost  is  little  under- 
stood except  by  experienced  managers  and  by  those  who  have 
made  a  study  of  the  subject.  An  analysis  and  study  of  the 
overhead  charges  by  a  competent  manager  is  necessary  for  the 
efficient  working  of  an  industrial  plant.  Superficial  criticism 
of  these  charges,  and  action  taken  thereon,  however,  may  re- 
sult in  a  decrease  in  efficiency. 

THE    WORKS     manager    VERSUS    FINANCIAL    CONTROL. 

In  nearly  all  cases  in  industrial  life  the  "  operating  ex- 
pense "  is  a  bone  of  contention  between  the  financial  control 
and  the  works  manager.  In  many  cases  —  yes,  in  the  major- 
ity—  the  financial  end  of  the  establishment  knows  nothing  of 
shop  management,  but  is  well  informed  regarding  accounting 
methods  and  knows  the  effect  produced  on  stockholders  and 
the  general  public  by  a  statement  of  high  operating  expenses 
in  the  annual  report.  High  operating  expenses  do  not  look 
well  in  financial  reports,  and  it  is  often  very  difficult  for  the 
works  management  to  persuade  the  financial  power  that  in 
many  cases  high  operating  expenses  result  in  efficiency  and 
lower  cost  of  the  output. 

If  the  establishment  is  a  manufacturing  concern  where  the 
cost  can  be  accurately  determined,  and  compared  with  previ- 
ous costs,  or  with  costs  of  competitors  as  shown  by  their 
selling  price,  the  works  manager  has  an  opportunity  to  prove 
his  side  of  the  case,  but  if  it  is  a  jobbing  concern,  or  a  repair 
plant,  where  no  such  comparison  can  be  made,  the  manager 
has  little  opportunity   for  proving  his  case,   and  he  will,   in 


SUPERVISION    OF    EXPENSE   ACCOUNTS  89 

many  cases,  be  required  to  reduce  the  operating  expense,  al- 
though he  knows  that  such  reduction  means  a  loss  to  his  com- 
pany. This  is  a  disheartening  experience  which  is  forced  on 
many  managers. 

IGNORANCE  OF  THE  RELATION   OF  OVERHEAD   CHARGES  TO 
TOTAL  COST. 

The  lack  of  knowledge  of  the  relation  existing  between 
overhead  expense  and  total  cost  is  by  no  means  confined  to 
the  financial  power,  as  it  even  sometimes  extends  to  managers 
themselves.  It  is  astonishing  how  little  is  known  concerning 
this  subject.  Some  good  business  men  —  men  who  should 
know  —  have  failed  to  grasp  the  true  meaning  of  overhead 
expense  and  its  relation  to  the  total  cost. 

I  know  of  one  important  repair  establishment  which  makes 
large  repairs  for  another  concern  on  the  basis  of  actual  cost 
plus  a  percentage  of  profit.  The  manager  of  the  concern  for 
whom  the  repairs  are  made  is  considered  an  excellent  business 
man  who  can  drive  a  hard  bargain.  The  manager  of  the  re- 
pair establishment  well  knows  that  endless  trouble  will  ensue 
if  the  bill  presented  contains  the  proper  percentage  of  over- 
head charges,  so  the  bill  shows  about  half  the  actual  overhead 
expense,  with  the  direct  charges  padded  to  make  up  the  bal- 
ance. 

Many  actually  do  not  know  what  goes  to  make  up  the  over- 
head expense.  Very  few  outside  of  experienced  managers 
know  that  much  productive  labor,  or  to  make  it  clearer,  direct 
labor,  cannot  be  charged  directly  to  a  job,  as  this  labor  is  em- 
ployed on  several  jobs  at  the  same  time,  and  must  necessarily 
be  distributed  to  the  jobs  either  on  the  basis  of  direct  labor 
charged  or  on  a  tonnage  basis.  Many  do  not  know  that  cer- 
tain material  must  be  charged  in  the  same  way,  and  that  this 
material,  though  it  appears  in  the  overhead  charges,  is  actu- 
ally used  on  the  job. 

I  have  heard  those  in  a  position  to  criticize,  in  a  position 
where  the  criticism  would  be  accepted  as  of  value,  express  the 
most  severe  criticism  of  the  management  of  a  shop  where  the 


90  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

pro-rated  charges,  including  general  expense,  amounted  to 
I  GO  per  cent.,  stating  that  it  cost  as  much  to  run  the  shop  as 
it  did  to  do  the  work  in  the  shop!  It  was  thought  that  the 
overhead  expense  consisted  of  charges  for  the  supervisory 
force,  clerks,  cost  of  power  and  minor  repairs  to  tools.  It 
was  not  considered  that  in  any  well-managed  establishment, 
the  overhead  charges  could  amount  to  loo  per  cent,  of  the 
labor  charged.  It  is  needless  to  say  the  one  making  this  criti- 
cism never  had  the  opportunity  of  analyzing  the  overhead 
charges  in  a  large  well-conducted  foundry  where  costs  are  ac- 
curately determined.  Such  is  the  ignorance  with  which  man- 
agers have  to  contend. 

DANGER   OF   SUPERFICIAL   CRITICISM. 

In  repair  plants,  or  in  establishments  where  work  of  large 
magnitude  is  undertaken  which  requires  several  years  to  com- 
plete, as  in  shipbuilding,  it  is  difficult  to  compare  costs  or  to 
measure  the  output.  Frequently,  also,  the  supreme  control  of 
the  establishment  is  in  a  city  office  far  distant  from  the  plant, 
and  knowledge  of  the  operation  of  the  plant  is  obtained  from 
monthly  reports  and  an  occasional  visit. 

Under  these  conditions  direct  costs  and  total  costs  cannot 
well  be  criticized,  and  the  criticism  therefore  naturally  turns 
to  the  expense  account.  There  is  apparently  something  in 
overhead  charges  which  attracts  the  criticism  of  nearly  every- 
one, for  one  hears  criticism  of  these  charges  from  those  who 
have  little  idea  of  what  goes  to  make  up  these  charges  and  who 
have  not  a  faint  conception  of  the  subject  in  its  bearing  on 
total  cost.  This  tendency  must  be  due  to  the  belief  that  the 
payment  of  money  for  overhead  expense  is  expenditure  with- 
out adequate  return. 

Superficial  criticism  of  the  expense  accounts  by  those  in 
authority  will  probably  result  in  decreased  efficiency. 

In  one  large  establishment  with  which  I  am  familiar  the 
shop-expense  accounts  are  kept  down  to  the  lowest  point  with- 
out regard  to  the  efficiency  of  the  tools  in  the  shops.  I  was 
shown  the  care  taken  to  keep  these  expenses  down  and  was 


SUPERVISION    OF    EXPENSE    ACCOUNTS  9I 

told  how  the  expense  had  been  cut  in  half  and  that  it  was 
believed  that  the  concern  had  a  lower  shop  expense  than  its 
competitors.  The  shops  surely  showed  this  —  there  was  no 
necessity  for  seeing  the  accounts.  Machines  were  in  poor 
condition;  belts  were  as  bad  as  they  could  be;  the  small  tool 
equipment  was  atrocious.  Moreover,  the  foreman  on  every 
opportunity  charged  shop  repairs  to  the  direct  cost  of  some 
big  job  in  the  shop,  rather  than  charge  to  the  expense  num- 
ber. There  is  not  the  slightest  doubt  that  the  blind  effort  of 
someone  in  authority  to  reduce  shop  expense  is  resulting  in 
large  losses  to  this  concern. 

When  a  concern  begins  to  lose  money  and  the  order  is 
given  to  economize  in  the  hope  of  changing  losses  to  profits, 
it  is  almost  invariably  true  that  reductions  will  immediately 
be  made  in  the  overhead  expense,  notwithstanding  the  fact 
that  the  remedy  required  may  be  more  and  better  supervision 
and  consequently  higher  overhead. 

When  the  expense  account  is  cut,  the  majority,  including 
some  managers,  feel  that  the  cut  is  just  so  much  saved.  The 
increase  in  direct  costs  cannot  be  seen ;  it  may  be  several  weeks 
or  months  before  there  is  an  increase,  as  the  momentum  of 
past  conditions  cannot  be  dissipated  immediately.  There  is 
little  doubt  that  the  effort  made  to  economize  by  cutting  the 
overhead  expense  has  carried  many  establishments  to  ruin. 

Unfortunately,  overhead  expense  is  generally  known  as  a 
percentage  of  the  direct  labor  charges,  and  the  more  the  effi- 
cient manager  reduces  his  direct  labor  costs,  the  higher  his 
overhead  expenses  appear  to  be. 

There  are  given  below  several  examples  of  shops  which 
have  come  directly  under  my  observation  In  which  the  subject 
of  shop  expense  required  intelligent  consideration.  In  each 
case  the  increase,  either  real  or  apparent,  of  the  shop  expense 
meant  increase  in  efficiency  while  the  decrease  resulted  in  a  re- 
duction in  efficiency. 


92  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

THE  SHOP   WITH    MACHINERY   IN    POOR   CONDITION   AND   WITH 
A  POOR  EQUIPMENT  OF  HAND  TOOLS. 

An  experienced  manager  who  knows  his  business  well  knows 
that  if  he  is  to  get  work  done  at  low  cost,  he  must  supply 
adequate  tools  with  which  his  men  are  to  work.  One  can  in 
practically  all  cases  judge  of  the  efficiency  of  a  shop  by  an 
inspection  of  the  machinery  and  the  tool-room  equipment.  A 
well-equipped  shop  is  not  always  an  efficient  shop,  but  it  is  cer- 
tain that  a  poorly-equipped  shop  with  machines  and  hand  tools 
in  bad  condition  is  never  an  efficient  shop.  The  higher  the 
wages,  the  more  important  it  is  to  provide  an  excellent  tool 
equipment. 

A  short  time  ago  an  important  shop,  located  in  a  district 
where  wages  are  very  high,  came  under  my  observation  and  I 
found  the  tool  equipment  in  atrocious  condition.  The  costs 
were  excessive  and  it  was  surprising  that  these  conditions 
should  have  existed  so  long  without  correction.  If  low  shop 
expense  percentage  is  the  aim,  it  is  easily  accomplished  by  not 
spending  money  to  bring  the  tool  equipment  up  to  a  proper 
standard.  Not  only  is  the  actual  expense  kept  low,  but  the 
expense  percentage  shows  very  low,  as  the  direct  labor  cost  to 
which  the  expense  cost  is  applied  to  obtain  the  percentage  is 
very  high. 

THE  SHOP  IN  WHICH  HIGH-PRICED  MECHANICS  ARE  EMPLOYED 
ON  WORK  THAT  SHOULD  BE  DONE  BY  BOYS  AND  HELPERS. 

A  great  many  Government  shops  fall  in  this  class,  though 
the  Government  has  no  monopoly  in  this  line.  I  recently  had 
occasion  to  investigate  a  boiler  shop  and  found  everywhere 
first-class  boilermakers  doing  work  that  should  be  done  by 
boys  and  helpers.  Boilermakers  were  cutting  off  tubes,  filing 
the  burs  after  the  tubes  were  cut,  polishing  the  ends  of  the 
tubes,  placing  the  tubes  in  position,  attending  the  motors  driv- 
ing the  expanders  and  other  work  of  this  character.  A  com- 
petent manager  knows  the  work  that  should  be  done  by  boys 
and  helpers.     He  is  in  touch  with  the  best  industrial  practice. 


SUPERVISION    OF    EXPENSE    ACCOUNTS  93 

He  knows  what  the  other  fellow  is  doing.  Such  a  manager 
will  replace  his  $4  a  day  boilermakers  with  $2  helpers  and  $1 
boys  wherever  possible.  He  will  reduce  costs.  But  what  is 
^  the  result  with  his  shop  expense  ?  For  every  dollar  that  he 
reduces  his  direct  cost,  his  percentage  of  shop  expense  goes  up. 
K  it  were  possible  for  him  to  replace  all  of  his  $4  boiler- 
makers  by  $2  helpers  without  reducing  the  output,  he  has  re- 
duced his  direct  costs  by  half  and  doubled  the  shop-expense 
percentage. 

If  the  aim  Is  to  reduce  the  shop-expense  percentage,  this 
can  readily  be  done.  No  effort  is  required  by  the  manager; 
all  that  is  required  is  for  him  to  do  nothing  —  the  percentage 
will  go  down  of  its  own  accord.  The  foreman  had  rather 
have  mechanics  than  helpers;  they  require  less  supervision; 
they  give  him  less  trouble.  Besides,  he  has  no  desire  to  get 
into  trouble  with  the  unions,  and  the  members  of  the  unions  are 
his  best  friends.  He,  therefore,  employs  mechanics  wherever 
possible  rather  than  boys  and  helpers  wherever  possible.  The 
result  is  a  large  labor  roll  and  a  small  percentage  of  shop 
expense. 

THE    SHOP    IN    WHICH    WORK    IS    DONE    BY    HAND    INSTEAD    OF 
WITH    MACHINES. 

The  boiler  shop  previously  referred  to  Is  an  excellent  exam- 
ple of  this  class.  Tubes  were  cut  out  by  boilermakers  with 
sledges  and  hand  chisels.  Tubes  were  expanded  in  some 
cases  by  hand-operated  expanders.  Boilermakers  with  hand 
files  removed  the  burs  on  the  tubes  made  by  the  cutting-off 
saw.  All  of  these  hand  operations  were  replaced  by  machine 
operations  and  the  direct  labor  cost  greatly  reduced,  the  total 
cost  was  reduced,  the  labor  roll  was  reduced,  but  the  actual 
shop  expense  was  slightly  increased,  and  the  shop-expense 
percentage  was  largely  increased. 

H  the  manager  can  replace  every  hand  operation  by  ma- 
chines, that  is,  use  altogether  automatic  machinery,  he  will 
no  doubt  enormously  reduce  his  direct  cost  and  total  cost,  but 
he  will  greatly  increase  the  shop  expense  and  the  shop-expense 


94  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

percentage  will  reach  infinity.  Surely  no  one  will  criticize 
such  a  manager  for  high  shop  expense,  yet  to-day  one  hears 
criticism  as  senseless  as  this. 

THE    SHOP    IN    WHICH    THE    OUTPUT    IS    LOW    AND    THERE   IS 
MUCH   LOAFING. 

If  a  manager  takes  over  a  shop  in  which  the  output  is  low, 
where  the  men  are  not  doing  a  full  day's  work,  and  succeeds  in 
bettering  conditions  and  increasing  the  output  per  man,  he 
will  for  the  same  amount  of  work  reduce  his  labor  roll,  but 
at  the  same  time  increase  his  shop-expense  percentage.  Surely 
such  a  manager  is  not  to  be  criticized.  It  will  be  just  as  sensi- 
ble to  commend  the  manager  who  acquires  a  well-run  shop  and 
allows  his  men  to  loaf  to  make  a  larger  labor  roll  in  order  that 
he  can  show  a  reduction  in  his  shop  expense. 

OTHER    METHODS    OF    REDUCING    SHOP    EXPENSE. 

There  are  other  methods  than  those  previously  indicated  by 
which  the  shop  expense  may  be  reduced  without  any  increase 
in  efficiency,  or  which  may  result  in  a  decrease  in  efficiency. 
In  many  shops,  for  example  a  foundry,  there  is  much  miscel- 
laneous labor  employed  on  many  different  jobs.  This  labor 
cannot  equitably  be  charged  direct,  and  is  distributed  to  the 
jobs  either  on  a  tonnage  or  direct  labor  basis,  as  an  indirect 
charge.  Those  who  wish  to  make  a  good  showing  with  the 
indirect  charges  frequently  arbitrarily  charge  this  labor  direct 
to  jobs  with  the  result  that  a  few  large  jobs  bear  this  expense 
while  the  small  jobs  get  none  of  it. 

So  eager  are  some  to  make  a  good  showing  with  the  expense 
accounts  that  frequently  men  employed  as  leading-men,  or 
strictly  in  a  supervisory  capacity,  though  not  known  as  fore- 
men or  assistant  foremen,  are  charged  direct  to  the  jobs  in- 
stead of  being  properly  charged  to  the  supervisory  number. 
The  only  result  of  charges  of  this  kind  is  to  make  the  costs  less 
accurate,  and  fool  someone  in  authority  into  believing  that 
he  has  through  good  management  obtained  low  expense  ac- 
counts. 


SUPERVISION    OF    EXPENSE   ACCOUNTS  95 

COMPARISON  OF  OVERHEAD  EXPENSE  PERCENTAGES  OF  DIFFER- 
ENT ESTABLISHMENTS  MEANS  NOTHING. 

Even  though  estabHshments  of  the  same  general  character 
have  the  same  cost-keeping  system,  which  is  far  from  being 
the  case,  a  comparison  of  the  expense  accounts  is  of  Httle 
value,  and  a  comparison  of  the  expense  percentages  is  a  waste 
of  time. 

Before  there  can  be  a  comparison  of  any  value  of  expense 
accounts,  the  detail  methods  of  charging  must  be  standard, 
the  methods  of  management  must  be  standard,  the  facilities 
must  be  very  much  the  same,  and  the  working  conditions  the 
same. 

An  establishment  having  the  highest  expense  charges  may 
easily  be  the  most  efficient,  while  the  one  with  the  lowest  may 
be  the  most  inefficient.  The  overhead  charges  are  in  no  sense 
a  measure  of  the  efficiency  of  a  plant;  the  measure  of  effi- 
ciency is  total  cost,  and  not  a  part  of  the  total  cost. 

HOW    CAN    PROPER    CONTROL    OF    THE    EXPENSE    ACCOUNTS    BE 

SECURED  ? 

The  analysis,  study  and  control  of  the  expense  account  is 
a  most  interesting  field  to  the  manager  of  experience  who 
knows  his  job.  It  is  Greek  to  one  who  does  not.  If  you  have 
enough  confidence  in  a  manager  to  place  him  in  charge  of 
your  establishment,  let  him  control  the  expense  accounts;  do 
not  tell  him  to  reduce  expenses  by  cutting  the  expense  ac- 
counts; if  the  product  is  costing  too  much,  it  may  be  that  the 
cost  may  be  reduced  by  increasing  the  overhead ;  hold  him  re- 
sponsible for  total  costs  and  not  a  portion  of  the  total  costs. 

The  cost-keeping  system  should,  however,  be  such  that  an 
inspection  will  readily  show  where  the  overhead  charges  have 
gone.  Each  month  there  should  be  prepared  for  the  manager 
a  complete  analysis  of  the  expense  accounts.  These  can  best 
be  shown  month  by  month  in  parallel  columns. 

Fig.  9  gives  the  analysis  of  the  shop  expense.  Each  shop 
has  a  separate  expense  account,  subdivided  as  necessary,  and 


96 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


there  should  be  an  analysis  sheet  for  each  shop.  With  this 
sheet  before  him  for  each  shop  a  manager  can  tell  exactly 
where  the  mo^ey  is  going.     He  can  see  at  once  any  abnormal 


Manufacturing    Department.                                             Shop    Expense   Report. 
Machine   Shop — "SM" 

Account. 

July. 

August. 

Symbol. 

Labor. 

Material. 

Labor. 

Material. 

Supervisory   and   office   force 

SMA 

Miscellaneous    labor 

SMB 

Fixtures    and    furniture 

SMC 









Dressing    and     grinding    old 
tools     

SMD 

Maintenance    of    small-    and 
loose-tool    equipment 

SME 

SMF 

SMG 



Pneumatic    tools   and    hose.. 

SMH 

Belting    

SMI 

1 

Power     transmission 

SMJ 

Cranes,    hoists   and   elevators 

SMK 

SML 



Repairs   to   machine   tools... 

SMM 

SMN 

— 

SMO 

Power,   heat  and  light 

SMP 



Correction  of  errors  

SMR 

General    stores   and    supplies 

SMS 

Operation    of    tool   room.... 

SMT 



— 

Part    plant    development 

SMX 

Repairs  and  maintenance  of 
buildings 

SMZ 

Fig.  9.     Form  for  Analyses  of  the  Shop  Expense. 

expenditures  and  find  out  the  cause.  He  should  have  each 
charge  investigated  until  he  has  obtained  a  working  minimum 
and  thereafter  he  will  only  have  to  deal  with  the  exceptions. 

Fig.  10  shows  the  analysis  month  by  month  of  the  general 
expense.  This  analysis  should  be  studied  and  treated  as  de- 
scribed for  the  shop  expense. 


SUPERVISION    OF    EXPENSE   ACCOUNTS 


97 


Manufacturing  Department.                General  Expense  Report. 

"G" 

Account. 

Symbol. 

July. 

August. 

Labor. 

Material. 

Labor. 

Material. 

Salaries  of  General  Officers 

GA 

Office   Salaries 

GB 



Cleaning  and  Care  of  Yard 
Outside  of  Shops. .; 

GC 

Drawing   Office 

GD 

Experiments       

GE 

Fixed    Charges 

GF 

Repairs  and  Maintenance  of 
Floating  Property 

GG 

Hauling,    Handling    Stores, 
and  Shipping 

GH 

Stable    Expense 

GI 



Legal    Expense 

GJ 

Dues   and   Assessments 

GK 



Leave  and  Holidays 

GL 

Patents     

GM 

Telephone  and  Telegraph.. 

GN 

General  Office  Fixtures  and 
Furniture                 ...... 

GO 

Plant  Repairs  Outside  Shops 

GP 

Office  Supplies  and  Postage 

GS 

Travelling  Expenses 

GT 

GU 

Miscellaneous     

GV 

Watchmen     

GW 



Part   Plant  Development... 

GX 

GY 

Repairs  and  Maintenance  of 
Buildings 

GZ 

Analyses  of  the  General  Expense. 


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SUPERVISION    OF    EXPENSE    ACCOUNTS  99 

A  similar  comparative  report  should  be  made  each  month 
for  the  power-house  expense,  storehouse  expense,  selling  ex- 
pense, and  the  drawing-office  expense. 

Fig.  II  is  a  summary  of  all  the  expense  accounts,  showing 
the  expenditures  this  month,  last  month,  and  the  average  of 
the  year  to  date.  It  also  shows  the  direct  labor  charges  in 
each  shop  and  the  percentage  of  each  class  of  overhead  to  the 
direct  labor  charged. 

With  this  information  a  manager  should  be  able  to  abso- 
lutely control  the  expense  accounts. 


CHAPTER  VIII 
Methods  Followed  in  the  Payment  of  Labor 

As  the  methods  for  the  payment  of  labor  are  generally  known 
and  the  advantages  and  disadvantages  of  the  various  systems 
are  fairly  well  understood,  but  brief  reference  will  be  made 
to  this  subject. 

Day  Work:  —  Payment  in  accordance  with  the  number  of 
hours  worked  is  the  method  most  generally  employed  and  is 
the  most  unsatisfactory.  Under  this  system  there  is  little 
incentive  for  a  workman  to  exert  himself,  and  consequently 
the  output  is  very  low.  It  is  not  uncommon  for  a  man  work- 
ing by  the  day  to  double  or  treble  his  output  when  put  on 
piece  work.  There  is  little  doubt,  however,  that  day  work 
as  it  is  usually  found  can  be  greatly  improved.  In  piece  work, 
premium  work,  bonus  work,  etc.,  the  output  of  each  man  is 
carefully  recorded  each  day,  and  the  management  knows  the 
relative  efficiency  of  the  men.  In  day  work  it  is  the  rare  ex- 
ception to  find  records  of  the  output  of  each  man,  and  the 
real  efficiency  of  the  man  is  unknown ;  the  management's  in- 
formation on  this  important  subject  is  based  on  the  general 
knowledge  of  the  foreman  that  a  workman  is  a  ''  good  man  " 
or  a  ''  poor  man."  It  is  surprising  that  w^hen  knowledge  takes 
the  place  of  guess-work  —  when  the  efficiency  of  a  man  is 
based  on  the  quantity  of  work  of  standard  quality  as  measured 
day  by  day  —  to  find  that  a  number  of  "  good  men  "  become 
*'  poor  men,"  and  a  number  of  ''  poor  men  "  become  ''  good 
men."  Correct  records  made  each  day  of  the  amount  of 
work  accomplished  by  each  man,  with  increased  pay  for  the 
deserving  and  reductions  and  discharge  for  the  poorer  men 
will  make  a  wonderful  improvement  in  the  ordinary  day-work 
shop.  If  such  records  are  kept  and  the  pay  of  the  men  is 
graded  in  accordance  with  the  output  and  no  other  change  is 

I  GO 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR        101 

made  in  the  shop  the  output  in  the  usual  run  of  day-work 
shops  will  be  increased  not  less  than  25  per  cent.  In  a  sub- 
sequent chapter  will  be  recorded  the  improvement  that  has 
actually  been  obtained  by  keeping  records  of  the  output  of 
each  man. 

The  day-work  system  at  best  is  not  satisfactory;  to  obtain 
the  best  results  each  workman  must  have  an  incentive  to  put 
forth  his  best  efforts,  and  if  he  does  put  forth  his  best  efforts 
his  reward  must  be  liberal  and  immediate.  Workmen  as  a 
rule  do  not  look  far  in  the  future;  a  possible  distant  reward 
will  seldom  bring  forth  extra  exertions  from  the  average 
workman;  to  secure  the  best  results  the  reward  should  be  im- 
mediate; if  a  workman  puts  forth  extra  efforts  and  accom- 
plishes more  than  the  usual  amount  of  work  he  should  know 
the  next  morning  the  amount  of  the  reward  he  is  to  receive 
for  his  extra  efforts.  This  is  the  only  way  in  which  the  maxi- 
mum output  can  be  obtained  from  the  average  workman,  and 
under  the  day-work  system  at  its  best  this  is  impossible. 

mPontract  System:  —  The  contract  system  consists  of  assign- 
ing definite  jobs  of  work  to  a  competent  workman  at  a  stipu- 
lated price  and  allowing  him  to  employ  his  own  workmen, 
and  follow  his  own  methods,  and  giving  him  the  use  of  the 
plant  equipment  necessary  for  the  work. 

In  one  of  the  large  shipyards  this  system  is  extensively  em- 
ployed and  appears  to  give  excellent  results  —  at  least,  excel- 
lent when  compared  with  results  previously  obtained  under 
the  day-work  system. 

The  contractors  in  this  yard  are  generally  men  who  were 
formerly  employed  as  assistant  foremen  and  leading  men. 
The  management  and  the  contractor  agree  on  a  price  for  a 
given  job  of  work;  the  company  em.ploys  the  men  and  pays 
them  day  wages,  and  by  mutual  agreement,  they  are  assigned 
to  work  with  the  contractor.  When  the  job  is  finished  the 
amount  that  has  been  paid  out  by  the  company  on  the  contract 
is  deducted  from  the  agreed  price  and  the  balance  paid  to  the 
contractor,  who  distributes  the  profits  to  himself  and  to  the 
various   workers.     The  company  sees  that  every   worker  is 


I02  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

paid  the  prevailing  day  wages,  but  the  distribution  of  the 
profits  is  left  to  the  contractor.  The  company  keeps  books 
for  the  contractor  and  knows  the  cost  of  the  job,  and  thus 
knows  whether  the  contract  price  is  high  or  low.  The  con- 
tractor knows  the  abilities  of  the  small  number  of  men  em- 
ployed and  he  knows  the  work  that  each  accomplishes,  and  if 
a  just  distribution  is  made  of  a  portion  of  the  profits  to  the 
workmen  as  a  bonus,  the  incentive  is  provided  and  a  large  out- 
put can  be  obtained  from  the  workers. 

Some  of  the  results  obtained  in  this  establishment  can  truly 
be  called  astonishing  if  the  inefficiency  of  day  labor  and  also 
the  inefficiency  of  the  usual  supervisory  force  were  not  known 
and  considered.  In  several  cases  assistant  foremen,  as  con- 
tractors, retained  supervision  of  work  which  had  been  under 
their  charge  under  the  day-work  system ;  the  same  men  were 
employed,  and  the  shop  conditions  remained  the  same,  yet 
the  contract  price  was  about  half  the  previous  cost  to  the  com- 
pany, and  still  the  contractor  earned  substantial  profits  after 
paying  a  good  bonus  to  the  workmen. 

If  any  manager  has  any  lingering  doubt  regarding  the  de- 
sirability of  paying  a  bonus  to  foremen  and  assistent  foremen, 
as  well  as  to  workmen,  these  doubts  should  be  dispelled  by  an 
investigation  of  the  contract  system  at  this  establishment. 
This  contract  system  is,  in  effect,  a  bonus  system,  and  not  only 
do  the  deserving  workmen  receive  a  bonus,  but  the  men  in 
charge  of  the  work  also  receive  a  substantial  reward.  This 
system  has  changed  mediocre  or  inefficient  gang  bosses  into 
an  efficient  supervisory  force. 

In  some  cases  the  contract  price  is  low  and  no  profit  is 
made.  In  these  cases  the  management  considers  each  case  on 
its  merits.  If  it  appears  that  the  fault  is  due  to  the  price 
being  too  low  rather  than  poor  management  on  the  part  of 
the  contractor,  the  loss  is  not  charged  to  the  contractor.  If 
it  is  believed  that  the  loss  is  due  to  poor  management,  and 
particularly  if  the  records  show  that  the  contractor  has  made 
substantial  profits  on  previous  contracts,  the  loss  is  charged 
against  him.  ^ 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR        IO3 

The  contract  system  is  an  improvement  on  the  day-work 
system,  but  it  is  open  to  objections.  The  contractor  and  his 
men  may  abuse  tools  and  plant  equipment  in  their  efforts  to 
obtain  large  output,  and  there  is  an  opportunity  for  work  to  be 
done  on  the  contract  job  by  men  not  employed  under  the  con- 
tractor. There  is  the  tendency  on  the  part  of  the  contractor 
to  soldier  on  some  jobs,  for  example,  if  the  contract  price  is 
high,  the  contractor  knows  that  if  his  profits  are  too  large  the 
price  of  the  next  job  will  be  cut;  he  knows  within  very  close 
limits  the  profit  that  the  company  will  allow  him  to  make  with- 
out cutting  the  price,  and  in  these  cases  he  will  soldier  on  the 
job  sufficiently  to  prevent  the  price  being  cut.  The  case  is 
similar  in  every  respect,  and  the  motives  are  the  same,  as 
those  of  a  piece-worker  who  soldiers  to  prevent  the  employer 
from  learning  how  quickly  the  work  can  be  done,  and  the 
soldiering  in  both  cases  is  to  prevent  cutting  the  price. 

There  is  no  accurate  knowledge  on  the  part  of  either  the 
contractor  or  of  the  management  as  to  what  the  job  should 
cost.  There  are,  no  doubt,  on  some  jobs  previous  costs,  but 
these  in  many  cases  are  far  from  what  the  job  should  cost. 
Both  the  contractor  and  the  management  having  no  accurate 
knowledge  of  the  money  value  of  the  job,  there  must  ensue 
the  inevitable  bargaining  in  which  each  attempts  to  deceive 
the  other,  before  the  contract  price  is  fixed. 

Aside  from  the  objections  noted,  the  contract  system,  as 
described,  appears  to  be  a  drifting  system,  even  though  it 
drifts  in  the  right  direction.  The  management,  confessing 
that  it  does  not  know  how  much  a  worker  should  accomplish, 
confessing  that  it  is  not  willing  to  take  the  necessary  steps  to 
find  out  how  much  a  man  should  do,  confessing  that  it  is  un- 
able to  devise  a  scheme  of  management  and  a  scheme  for  the 
payment  of  labor  which  will  bring  forth  the  very  best  from 
every  workman,  turns  over  its  burden  and-  its  responsibilities 
to  one  of  its  subordinate  assistant  foremen  to  work  out  in  a 
small  way  the  problem  which  the  management  confesses  that  it 
is  not  able  to  work  out  in  a  large  way. 

The  Premiuui  System:  —  The  premium  plan  of  paying  for 


I04  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

labor  was  devised  by  Mr.  F.  A.  Halgey,  and  is  in  successful 
operation  in  a  large  number  of  important  plants  both  in  this 
country  and  abroad.  It  is  described  by  Mr.  Halsey  in  a  paper 
read  before  the  Society  of  Mechanical  Engineers,  from  which 
the  following  is  a  quotation : 

"  The  plan  assumes  two  slightly  different  forms,  according 
to  the  nature  of  the  work;  one  form  being  suited  to  work  pro- 
duced in  such  quantities  as  to  be  reducible  to  a  strictly  manu- 
facturing basis,  and  the  other  form  to  the  more  limited  produc- 
tion of  average  practice.  In  both  forms  the  essential  principle 
is  the  same,  as  follows:  The  time  required  to  do  a  given 
piece  of  work  is  determined  from  previous  experience,  and 
the  workman,  in  addition  to  his  usual  daily  wages,  is  offered 
a  premium  for  every  hour  by  which  he  reduces  that  time  on 
future  "work,  the  amount  of  the  premium  being  less  than  his 
rate  of  wages.  Making  the  hourly  premium  less  than  the 
hourly  wages  is  the  foundation  stone  on  which  rest  all  the 
merits  of  the  system,  since  by  it,  if  an  hour  is  saved  on  a 
given  product  the  cost  of  the  work  is  less  and  the  earnings 
of  the  workman  are  greater  than  if  the  hour  is  not  saved,  the 
workman  being  in  effect  paid  for  saving  time.  Assume  a 
case  in  detail:  Under  the  old  plan  a  piece  of  work  requires 
ten  hours  for  its  production,  and  the  wages  paid  is  thirty 
cents  per  hour.  Under  the  new  plan  a  premium  of  ten  cents 
is  offered  the  workman  for  each  hour  which  he  saves  over 
the  ten  previously  required.  If  the  time  be  reduced  succes- 
sively to  five  hours  the  results  will  be  as  shown  on  page  105. 

"  This  table  illustrates  the  manner  in  which  the  cost  of  the 
work  diminishes  and  the  workman's  earnings  increase  to- 
gether until,  to  cite  the  extreme  case  of  the  last  line,  if  the  out- 
put be  doubled,  the  wages  paid  per  piece  will  be  reduced 
33  i"3  pci"  cent.,  but  the  workman's  earnings  per  hour  will  be 
increased  33  1-3  per  cent.  Were  the  premium  less  than  ten 
cents  per  hour,  the  reduction  in  cost  for  each  hour  saved 
would  be  greater,  and  the  workman's  earnings  less.  On  the 
other  hand,  the  workman  would  have  a  smaller  incentive,  and 
the  time  would  not  be  reduced  so  much.     The  output  would 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR 


105 


be  less,  and  the  net  result  might  be  worse  for  both  employer 
and  employee.  This  raises  the  inevitable  question:  What 
should  be  the  rate  of  the  premium?  Nothing  but  good  sense 
and  judgment  can  decide  in  any  case.  In  certain  classes  of 
work  an  increase  of  production  is  accompanied  with  a  propor- 
tionate increase  of  muscular  exertion,  and  if  the  work  is  al- 
ready laborious  a  liberal  premium  will  be  required  to  produce 
results.  In  other  classes  of  work  increased  production  re- 
quires only  increased  attention  to  speeds  and  feeds  with  an  in- 


Column 
No.  I 

Column 
No.  2 

Column 
No.  3 

Column 
No.  4 

Column 
No.  5 

Time 
Consumed 

Wages 
per  Piece 

Premium 

Total  Cost 
of  Work  — 
Column  2  + 
Column  3. 

Workman's 
Earnings  per 
Hour  =:  Col.  4 
-f-  Column  I. 

Hours 

$ 

$ 

$ 

$ 

10 

3.00 

0.00 

3.00 

.30 

9 

2.70 

.10 

2.80 

•311 

8 

2.40 

.20 

2.60 

.325 

7 
6 

2.10 
1.80 

•30 
.40 

2.40 
2.20 

•343 
.366 

5 

1.50 

•50 

2.00 

.40 

crease  of  manual  dexterity  and  an  avoidance  of  lost  time.  In 
such  cases  a  more  moderate  premium  will  suffice.  Any  at- 
tempt, how^ever,  on  the  part  of  the  employer  to  be  greedy  and 
squeeze  the  lemon  too  dry  w^ill  defeat  its  own  object,  since  if 
a  trifling  premium  be  offered,  the  workman  will  not  consider 
it  worth  while  to  exert  himself  for  so  small  a  reward,  and 
the  expected  increase  of  output  will  not  take  place.  On  the 
other  hand,  if  the  premium  offered  be  too  high,  the  employer 
will  simply  pay  more  than  necessary  for  his  work,  though 
less  than  he  has  been  paying.  If  the  rate  of  premium  is  de- 
cided upon  judiciously,  it  may  and  should  be  made  perma- 
nent. No  cutting  down  of  the  rate  should  ever  be  made  un- 
less, indeed,  improved  processes  destroy  the  significance  of 
the  first  base.     Every  increase  of  earnings  is  necessarily  ac- 


I06  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

companied  by  a  corresponding  decrease  of  cost,  and  if  the 
premium  be  such  as  to  give  these  a  satisfactory  relation,  the 
workman  may  be  assured  that  there  will  be  no  limit  set  to 
his  earnings;  that  the  greater  they  are  the  more  satisfactory 
they  will  be  to  the  employer.  The  importance  of  this  cannot 
be  too  strongly  insisted  upon.  If  the  premiums  be  cut  the 
workmen  will  rightly  understand  it  to  mean,  as  under  the 
piece-work  plan,  that  their  earnings  are  not  to  be  permitted  to 
pass  a  certain  limit,  and  that  too  much  exertion  is  unsafe. 
The  very  purpose  of  the  plan  is  to  avoid  this  by  so  dividing  the 
savings  between  employer  and  employee  as  to  remove  the 
necessity  for  cutting  the  rate,  and  hence  enable  the  workman's 
earnings  to  be  limited  only  by  his  own  ability  and  activity. 
The  baneful  feature  of  the  piece-work  plan  is  thus  completely 
obviated,  and  instead  of  periodical  cuts  with  their  resulting 
ill-feeling,  the  premiums  lead  the  workman  to  greater  and 
greater  effort,  resulting  in  a  constant  increase  of  output,  de- 
crease of  cost,  and  increase  of  earnings. 

**  The  broad-minded  employer  will  not  fail  to  recognize  that 
his  own  gain  from  the  system  comes  largely  from  the  in- 
creased production  from  a  given  plant,  since  not  only  does  the 
system  reduce  the  wages  cost  of  the  piece  of  work  in  hand, 
but  in  so  doing  it  increases  the  capacity  of  the  plant  for  other 
work  to  follow.  The  advantages  from  this  source  are  so 
great  as  to  render  unnecessary  and  refined  hair-splitting  as  to 
the  rate  of  the  premium. 

"  Such  is  the  premium  plan,  and  the  writer  confidently  pre- 
dicts that  the  more  it  is  studied  the  more  perfect  will  appear 
its  adaptation  to  the  requirements  of  industrial  enterprise  and 
human  nature.  Surely,  a  system  which  increases  output,  de- 
creases cost,  and  increases  workman's  earnings  simultaneously, 
without  friction,  and  by  the  silent  force  of  its  appeal  to  every 
man's  desire  for  a  larger  income,  is  worthy  of  attention.  In 
addition  to  the  commanding  features  noted  it  has  others  of 
lesser  note.  The  transition  to  it  from  the  day's  work  plan  is 
easy  and  natural.  It  does  not  involve  a  reorganization  of  the 
system  of  bookkeeping,  but  only  an  addition,  and  a  small  one. 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR        I07 

to  the  existing  system.  No  opposition  to  it,  organized  or 
otherwise,  is  possible,  since  there  is  simply  an  offer  to  gratify 
one  of  the  strongest  passions  of  human  nature,  and  the  diffi- 
culty often  found  in  introducing  piece  work  cannot  occur  with 
this." 

The  premium  system  is  in  marked  contrast  to  the  Bonus 
System  and  the  Differential  Piece  Rate  System,  in  that  in  the 
premium  system  no  attempt  is  made  to  determine  the  time  in 
which  the  work  should  be  done,  while  with  the  bonus  and  the 
differential  piece-rate  system  an  exact  determination  of 
the  time  required  to  do  the  work  is  the  foundation  on  which 
the  success  of  the  application  of  the  system  depends.  While 
with  the  premium  plan  the  maximum  output  will  seldom  be 
obtained,  and  the  management  in  a  measure  lets  the  workmen 
make  the  pace,  and  allows  the  workmen  to  decide  the  methods 
to  be  followed,  it  must  not  be  overlooked  that  this  system  can 
be  introduced  with  little  difficulty  in  many  shops,  where  it 
would  be  impossible  to  introduce  the  bonus  system  or  the  dif- 
ferential piece-rate  system  without  the  assistance  of  an  expert. 
The  premium  system  is  a  great  improvement  over  day  work 
and  over  the  piece-work  system  as  ordinarily  employed.  No 
elaborate  rate-setting  department  is  required,  for  the  standard 
times  are  the  times  that  have  been  taken  to  do  work  under 
ordinary  day  work,  and  on  this  account  the  system  can  be 
put  in  successful  operation  in  any  plant  by  the  management 
without  outside  assistance. 

The  Bonus  System:  —  The  bonus  system  was  devised  by 
Mr.  H.  L.  Gantt,  and  has  been  employed  by  him  in  a  number 
of  plants  with  great  success.  In  a  paper  read  before  the  So- 
ciety of  Mechanical  Engineers  Mr.  Gantt  describes  the  system 
as  follows: 

"  Under  this  system  each  man  has  his  work  assigned  him 
in  the  form  of  a  task  to  be  done  by  a  prescribed  method  with 
definite  appliances  and  to  be  completed  within  a  certain  time. 
The  task  is  based  on  a  detailed  investigation  by  a  trained  ex- 
pert of  the  best  methods  of  doing  the  work;  and  the  task  set- 
ter, or  his  assistant,  acts  as  an  instructor  to  teach  the  work- 


I08  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

men  to  do  the  work  in  the  manner  and  time  specified.  If  the 
work  is  done  within  the  time  allowed  by  the  expert,  and  is  up 
to  the  standard  for  quality,  the  workman  receives  extra  com- 
pensation in  addition  to  his  day's  pay.  If  it  is  not  done  in 
the  time  set,  or  is  not  up  to  the  standard  for  quality,  the 
workman  receives  his  day's  pay  only. 

"...  A  task  must  always  be  set  for  performing  a 
definite  operation  in  a  specific  manner,  a  minimum  time  being 
set  for  its  accomplishment.  As  compensation,  the  workman 
is  paid  for  the  time  set  plus  a  percentage  (usually  20  to  50) 
of  that  time,  provided  the  work  is  done  in  the  time  allowed  or 
less.  If  the  time  taken  is  more  than  the  time  allowed,  the 
workman  gets  his  day's  pay  only.  The  fact  that  in  setting 
the  task  the  manner  of  performing  the  operation  is  specified 
enables  us  to  set  another  task  for  the  same  operation  if  we 
develop  a  better  or  quicker  method. 

"If  after  having  performed  his  task  a  workman  wishes  to 
suggest  a  quicker  or  better  method  for  doing  the  same  work, 
he  is  given  an  opportunity  if  possible  to  demonstrate  his 
method.  If  the  suggested  method  really  proves  to  be  quicker 
or  better,  it  is  adopted  as  the  standard,  and  the  workman  is 
given  a  suitable  reward.  No  workman,  however,  is  allowed  to 
make  suggestions  until  he  has  first  done  the  work  in  the  man- 
ner and  time  specified. 

".  .  .  As  used  by  the  writer,  the  Task  and  Bonus  Sys- 
tem of  pay  is  really  a  combination  of  the  best  features  of 
both  day  and  piece  work.  The  workman  is  assured  his  day 
rate  while  being  taught  to  perform  his  task,  and  as  the  bonus 
for  its  accomplishment  is  a  percentage  of  the  time  allowed, 
the  compensation  when  the  task  has  been  performed  is  a  fixed 
quantity,  and  is  thus  really  the  equivalent  of  a  piece  rate.  Our 
method  of  payment  then  is  piece  work  for  the  skilled,  and 
day  work  for  the  unskilled,  it  being  remembered  that  if  there 
is  only  work  enough  for  a  few,  it  will  always  be  given  to  the 
skilled.  This  acts  as  a  powerful  stimulus  to  the  unskilled,  and 
all  who  have  any  ambition  try  to  get  into  the  bonus  class. 
This  cannot  be  too  clearly  borne  in  mind,  for  zve  have  here 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR        IO9 

all  the  advantages  of  day  work  combined  with  those  of  piece 
work  without  the  disadvantage  of  either,  for  the  day  worker 
who  has  no  ambition  to  become  a  bonus  worker  usually  of  his 
own  accord  seeks  work  elsewhere,  and  our  working  force  soon 
becomes  composed  of  bonus  workers,  and  day  workers  who  are 
trying  to  become  bonus  workers." 

The  Differential  Piece-Rate  System:  —  The  differential 
rate  system  of  piece  work  was  devised  by  Mr.  Fred  W.  Taylor 
and  was  used  with  great  success  by  him  both  at  Midvale  and 
Bethlehem.  It  consists  briefly  in  offering  two  different  rates 
for  the  same  job;  a  high  price  per  piece  in  case  the  work  is 
finished  in  the  shortest  possible  time  and  in  perfect  condition, 
and  a  low  price,  if  it  takes  a  longer  time  to  do  the  job,  or  if 
there  are  any  imperfections  in  the  work.  The  high  rate 
should  be  such  that  the  workman  can  earn  more  per  day  than  is 
usually  paid  in  similar  establishments.  This  system  is  di- 
rectly the  opposite  of  the  ordinary  plan  of  piece  work,  in 
which  the  wages  of  the  workmen  are  reduced  when  they  in- 
crease their  productivity. 

Mr.  Taylor  in  his  paper  describing  the  differential  rate, 
read  before  the  Society  of  Mechanical  Engineers,  says: 

"  The  first  case  in  which  a  differential  rate  was  applied  fur- 
nished a  good  illustration  of  what  can  be  accomplished  by  it. 

"  A  standard  steel  forging,  many  thousands  of  which  are 
used  each  year,  had  for  several  years  been  turned  at  the  rate 
of  from  four  to  five  per  day  under  the  ordinary  system  of 
piece  work,  50  cents  per  piece  being  the  price  paid  for  the 
work.  After  analyzing  the  job  and  determining  the  shortest 
time  required  to  do  each  of  the  elementary  operations  of  which 
it  was  composed,  and  then  summing  up  the  total,  the  writer 
became  convinced  that  it  was  possible  to  turn  ten  pieces  a  day. 
To  finish  the  forgings  at  this  rate,  however,  the  machinists 
were  obliged  to  work  at  their  maximum  pace  from  morning 
to  night,  and  the  lathes  were  run  as  fast  as  the  tools  would  al- 
low, and  under  a  heavy  feed. 

"  It  will  be  appreciated  that  this  was  a  big  day's  work,  both 
for  men  and  machines,  when  it  is  understood  that  it  involved 


no  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

removing,  with  a  single  1 6-inch  lathe,  having  two  saddles,  an 
average  of  more  than  800  pounds  of  steel  chips  in  ten  hours. 
In  place  of  the  50-cent  rate  that  they  had  been  paid  before, 
they  were  given  35  cents  per  piece  when  they  turned  them  at 
the  speed  of  10  per  day,  and  when  they  produced  less  than  10, 
they  received  only  25  cents  per  piece. 

"  It  took  considerable  trouble  to  induce  the  men  to  turn  at 
this  high  speed,  since  they  did  not  at  first  fully  appreciate  that 
it  was  the  intention  of  the  firm  to  allow  them  to  earn  perma- 
nently at  the  rate  of  $3.50  per  day.  But  from  the  day  they 
first  turned  10  pieces  to  the  present  time,  a  period  of  more 
than  ten  years,  the  men  who  understood  their  work  have 
scarcely  failed  a  single  day  to  turn  at  this  rate.  Throughout 
that  time,  until  the  beginning  of  the  recent  fall  in  the  scale  of 
wages  throughout  the  country,  the  rate  was  not  cut. 

"  During  this  whole  period  the  competitors  of  the  company 
never  succeeded  in  averaging  over  half  of  this  production  per 
lathe,  although  they  knew  and  even  saw  what  was  being  done 
at  Midvale.  They,  however,  did  not  allow  their  men  to  earn 
over  from  $2  to  $2.50  per  day,  and  so  never  even  approached 
the  maximum  output. 

"  The  following  table  will  show  the  economy  of  paying 
high  wages  under  the  differential  rate  in  doing  the  above  job : 

COST  OF  PRODUCTION  PER  LATHE  PER  DAY 

ORDINARY    SYSTEM    OF    PIECE  DIFFERENTIAL    RATE   SYSTEM 

WORK 

Man's  Wages $2.50     Man's  Wages $3-5p 

Machine  Cost 3.37     Machine  Cost 3-3^ 

Total  Cost  per  Day. .  .$5.87         Total  Cost  per  Day.  .  .$6.87 
5  pieces  produced.                             10  pieces  produced. 
Cost  per  piece $i-i7     Cost  per  piece $0.69 

"  The  above  result  was  mostly,  though  not  entirely,  due  to 
the  differential  rate.  The  superior  system  of  managing  all  of 
the  small  details  of  the  shop  counted  for  considerable. 

"  There  has  never  been  a  strike  by  men  working  under  dif- 
ferential rates,  although  these  rates  have  been  applied  at  the 


METHODS    FOLLOWED    IN    THE    PAYMENT    OF    LABOR        III 

Midvale  Steel  Works  for  the  past  ten  years ;  and  the  steel  busi- 
ness has  proved  during  this  period  the  most  fruitful  field  for 
labor  organizations  and  strikes.  And  this  notwithstanding  the 
Midvale  Company  has  never  prevented  its  men  from  joining 
any  labor  organization.  All  of  the  best  men  in  the  company 
saw  clearly  that  the  success  of  a  labor  organization  meant  the 
lowering  of  their  wages,  in  order  that  the  inferior  men  might 
earn  more,  and,  of  course,  could  not  be  persuaded  to  join. 

"  I  attribute  a  great  part  of  this  success  in  avoiding  strikes 
to  the  high  wages  which  the  best  men  were  able  to  earn  with 
the  differential  rates,  and  to  the  pleasant  feeling  fostered  by 
this  system;  but  this  is  by  no  means  the  whole  cause.  It  has 
for  years  been  the  policy  of  that  company  to  stimulate  the 
personal  ambition  of  every  man  in  their  employ,  by  promoting 
them  either  in  wages  or  position  whenever  they  deserved  it, 
and  the  opportunity  came." 

Fixing  Rates  and  Standard  Times:  —  Both  Mr.  Taylor  and 
Mr.  Gantt  attach  great  importance  to  the  scientific  rate-fixing 
department.  Mr.  Gantt's  bonus  system  is  based  on  standard 
times  which  are  set  after  the  best  methods  have  been  de- 
termined by  experts  and  standardized.  Mr.  Taylor's  high 
and  low  rates  are  determined  in  the  same  manner.  Both  Mr. 
Taylor  and  Mr.  Gantt  consider  that  both  systems  will  fail 
without  scientific  rate-fixing;  indeed,  this  is  the  most  impor- 
tant element  of  both  of  these  systems. 

Mr.  Taylor  in  his  paper  says,  "  Of  the  two  devices  for  in- 
creasing the  output  of  a  shop,  the  differential  rate  and  the 
scientific  rate-fixing  department,  the  latter  is  by  far  the  more 
important.  The  differential  rate  is  invaluable  at  the  start,  as 
a  means  of  convincing  men  that  the  management  is  in  earnest 
in  its  intention  of  paying  a  premium  for  hard  work;  and  it  at 
all  times  furnishes  the  best  means  of  maintaining  the  top  notch 
of  production;  but  when,  through  its  application,  the  men  and 
the  management  have  come  to  appreciate  the  mutual  benefit 
of  harmonious  cooperation  and  respect  for  each  other's  rights, 
it  ceases  to  be  an  absolute  necessity.  On  the  other  hand,  the 
rate-fixing   department,    for   an   establishment   doing  a   large 


112  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

variety  of  work,  becomes  absolutely  indispensable.  The  longer 
it  is  in  operation  the  more  necessary  it  becomes." 

Mr.  Gantt  says,  regarding  task  setting,  "  Inasmuch  as, 
after  a  satisfactory  method  has  been  established,  a  large  pro- 
portion of  the  work  of  the  task  setter  is  the  study  of  the  time 
in  which  operations  can  be  performed,  he  is  popularly  known 
as  the  Time  Study  man.  This  term  has  lead  to  a  misconcep- 
tion of  his  duties  and  has  caused  many  honest  people  to  claim 
that  they  were  putting  in  our  methods  when  they  have  put  a 
stop-watch  in  the  hands  of  a  bright  clerk  and  told  him  to 
find  out  how  quickly  the  best  men  were  doing  certain  work. 
Unquestionably  they  have  in  many  cases  been  able  to  set  more 
accurate  piece  rates  by  this  method  than  they  had  been  able 
to  set  by  the  older  methods,  but  they  are  still  far  from  our 
ideal,  in  which  the  best  expert  available  investigates  the  work, 
standardizes  the  appliances  and  methods  and  sets  a  task  that 
involves  utilizing  them  to  their  very  best  efficiency.  While 
the  stop-watch  is  often  used  to  establish  a  method,  it  is  used  to 
determine  the  time  needed  to  do  the  work  only  when  the 
standard  methods  and  appliances  are  used  efficiently.  Stop- 
watch observations  on  work  done  inefficiently  or  with  ill- 
adapted  appliances,  or  by  poor  methods,  is  absurd  and  serves 
only  to  bring  into  disrepute  all  work  in  which  the  stop-watch 
is  used.  Moreover,  such  use  of  the  stop-watch  justly  excites 
the  contempt  and  opposition  of  the  workman. 

"  To  make  real  and  permanent  progress,  the  expert  must  be 
able  to  standardize  appliances  and  methods  and  write  up  such 
instructions  as  will  enable  an  intelligent  workman  to  follow 
them.  Such  standards  become  permanent,  and  if  the  work- 
man is  paid  a  proper  bonus  for  doing  the  work  in  the  manner 
and  time  set,  he  not  only  helps  maintain  the  standards,  but  soon 
begins  to  exert  his  influence  to  help  the  progress  of  standardi- 
zation." 

There  is  another  important  result  which  comes  from  the 
establishment  of  a  scientific  rate  department.  The  work  of 
this  department  brings  out  in  a  prominent  manner  the  necessity 
for  carefully  systematizing  all  the  details  of  the  management 


METHODS    FOLLOWED    IN    fHE    PAYMENT    OF    LABOR        II3 

of  the  shop.  Unless  this  is  done  the  rate  department  can 
make  no  progress;  a  rate  is  fixed  based  on  the  best  quahty 
of  high  speed  tools,  the  machine  in  excellent  order,  and  the 
belt  in  proper  condition,  while  the  work  may  be  done  with 
poor  tools  on  a  machine  out  of  adjustment.  Under  these 
conditions  a  rate-making  department  is  worse  than  useless,  yet 
these  are  conditions  which  will  be  found  in  the  average  job- 
bing shop.  With  a  rate  department,  such  important  details 
as  proper  care  of  machines,  care  of  belting,  proper  shape  of 
cutting  tools,  grinding  and  issue  of  tools,  care  of  appliances, 
etc.,  must  be  carefully  studied  and  standarized. 

Referring  to  this  subject  Mr.  Gantt  says,  "  The  fact,  so 
repeatedly  emphasized  by  Mr.  Taylor,  that  tasks  should  be 
set  only  as  the  result  of  a  scientific  investigation,  has  proven 
of  an  educational  value  hardly  to  be  over-estimated,  for  the 
scientific  investigation  of  a  process  that  has  been  developed 
without  the  assistance  of  science  almost  always  reveals  in- 
consistencies which  it  is  possible  to  eliminate,  thus  perfecting 
the  process  and  at  the  same  time  reducing  its  cost.  It  is  this 
scientific  investigation  that  points  to  improvement  in  methods 
and  educates  owners  and  managers.     .     .     ." 

Mr.  Taylor  speaks  even  more  strongly,  saying,  "  In  many 
cases  the  greatest  good  resulting  from  the  application  of  these 
systems  is  the  indirect  gain  which  comes  from  the  enforced 
standardization  of  all  details  and  conditions,  large  and  small, 
surrounding  the  work.  All  of  the  ordinary  systems  can  be, 
and  are  almost  always  applied  without  adopting  and  maintain- 
ing thorough  shop  standards.  But  the  task  idea  cannot  be 
carried  out  without  them." 


CHAPTER  IX 

Management 

A  TREATISE  on  cost  keeping  can  not  be  complete  without  con- 
sideration of  the  fundamental  principles  of  management.  Not 
many  years  ago  it  was  considered  that  defects  in  management 
should  be  located  by  an  analysis  of  costs  and  a  study  of  the 
various  elements  of  total  cost.  Much  can  be  accomplished 
in  this  way,  as  pointed  out  in  preceding  chapters,  but  it 
should  not  be  overlooked  that  this  is  not  the  best  method  to 
follow;  this  is  not  scientific  treatment  of  an  important  problem 
which  can  best  be  solved  by  scientific  methods.  With  a  good 
system  an  analysis  of  the  cost  figures  will  indicate  defects 
in  management,  and  will  show  the  waste  of  both  labor  and 
material.  These  defects  can  be  remedied,  and  the  wastes 
avoided  in  future  work,  but  the  losses  already  incurred  cannot 
be  recalled.  If  every  defect  shown  by  an  analysis  of  costs  be 
corrected  —  and  in  many  cases  this  will  involve  radical 
changes  in  organization  and  methods  —  the  establishment  will 
eventually  reach  a  high  state  of  efficiency,  but  this  will  require 
time,  and  many  managers  now  realize  that  at  best  this  is.  but 
a  drifting  method. 

The  problem  should  be  approached  in  a  scientific  manner; 
the  root  of  the  evil  should  be  attacked;  the  organization  and 
methods  should  be  studied  and  analyzed,  the  defects  discov- 
ered and  remedied;  there  should  be  proper  planning  of  all 
work,  followed  by  effective  foremanship  to  see  that  the  work 
is  executed  as  planned. 

It  must  not  be  assumed  that  accurate  cost  keeping  and  de- 
tailed analysis  pf  costs  plays  no  part  in  this  system ;  it  is  an 
essential  part  of  the  system ;  it  is  even  more  effective  than 
when  defects  in  organization  and  methods  of  management 
have  not  first  been  corrected,  for  the  analysis  will  now  defi- 

114 


MANAGEMENT  II5 

nitely  place  the  blame  for  excessive  production  costs.  An 
accurate  cost  system  is  an  integral  part  of  the  scheme  of  or- 
ganization and  it  performs  its  function  just  as  every  other  part 
of  the  system  or  every  individual  in  the  organization  performs 
its  or  his  function. 

During  recent  years  shop  management  has  received  a  great 
deal  of  attention  from  competent  engineers  a'nd  managers. 
The  correct  type  of  management  has  been  widely  discussed 
and  much  has  been  written  on  the  subject. 

On  one  hand,  competent  engineers  who  have  studied  the 
subject  for  years  recommend  a  system  of  management  which 
largely  increases  the  number  of  non-producers  and  increases 
the  cost  of  management.  These  engineers  claim  that  the  in- 
creased returns  will  pay  many  times  over  for  the  increased 
cost  of  management.  They  point  to  the  successful  establish- 
ments which  are  using  this  type  of  management ;  they  give 
numerous  examples  where  costs  have  been  enormously  re- 
duced and  at  the  same  time  wages  have  been  increased ;  they 
claim  that  the  system  which  they  advocate  will  settle  many 
of  the  differences  between  capital  and  labor,  and  that  under 
this  system  there  will  be  cordial  cooperation  between  em- 
ployers and  employees.  The  advocates  of  this  system  claim 
that  the  general  principles  of  this  type  of  management  are 
applicable  to  all  forms  of  industrial  work,  and  point  to  the 
remarkable  results  which  have  been  obtained  where  these  prin- 
ciples have  been  observed,  not  only  in  machine  shops,  but  also 
to  miscellaneous  work  done  by  common  labor,  such  ^s  handling 
pig  iron,  shoveling  coal,  excavation  work,  etc.  They  also 
show  that  similar  results  have  been  obtained  in  the  textile 
mills,  in  the  bleacheries,  in  bricklaying,  in  tli€  erection  of  build- 
ings, and  also  in  general  contracting  work. 

Mr.  Fred  W.  Taylor,  of  Philadelphia,  is  the  originator  of 
this  type  of  management,  and  he  has  for  years  labored  in- 
cessantly for  progress  in  management.  Mr.  Taylor  believes 
that  management  is  an  art,  in  that  it  is  the  systematic  applica- 
tion of  knowledge  and  skill  in  effecting  a  desired  result.  In 
his  essay  on  ''  Shop  Management,"  he  states,  *'  Management 


Il6  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

is  destined  to  become  more  of  an  art,  and  many  of  the  ele- 
ments which  are  now  beheved  to  be  outside  the  field  of  exact 
knowledge  will  soon  be  standarized,  tabulated,  accepted  and 
used,  as  are  now  the  many  elements  of  engineering.  Manage- 
ment will  be  studied  as  an  art  and  will  rest  upon  well-recog- 
nized, clearly-defined  and  fixed  principles  instead  of  depending 
upon  more  or  less  hazy  ideas  received  from  a  limited  observa- 
tion of  the  few  organizations  with  which  the  individual  may 
have  come  in  contact."  As  science  is  systematized  knowl- 
edge, Mr.  Taylor's  type  of  management  is  justly  called  "  Scien- 
tific Management,"  and  this  term  is  now  not  only  accepted 
by  the  engineering  profession,  but  also  by  the  world  at  large, 
as  descriptive  of  the  principles  of  management  advocated  by 
Mr.  Taylor  and  his  associates. 

On  the  other  hand,  some  managers  of  large  successful  es- 
tablishments take  issue  with  Mr.  Taylor  and  assert  that  the 
detail  methods  advocated  are  not  necessary;  they  claim  that 
the  detail  planning  of  all  work  takes  all  initiative  from  the 
workmen  and  will  in  time*make  them  mere  machines.  Un- 
fortunately many  men  in  the  shop  who  do  not  understand  the 
principles  of  scientific  management  or  the  detail  methods  re- 
quired to  apply  these  principles,  believe  all  of  the  criticism 
they  hear  and  read  of  these  methods  and  are  ready  to  oppose 
any  changes  which  they  think  lead  towards  "  Taylor  Meth- 
ods." While  the  number  of  managers  and  engineers  who 
oppose  scientific  management  will  each  year  grow  smaller  and 
the  opposition  w^ill  in  time  disappear,  it  seems  desirable  to 
consider  the  reasons  for  this  opposition. 

Is  scientific  management  the  use  of  a  lot  of  reports,  blank 
forms,  and  red-tape  methods,  employing  an  army  of  non-pro- 
ducers, who  increase  the  overhead  expense  and  produce  no 
adequate  return?  If  so,  it  is  a  fraud  parading  under  an  at- 
tractive name.  Or,  is  it  a  scientific  treatment  of  an  important 
industrial  problem? 

There  are  some  who  appear  to  believe  that  scientific  man- 
agement is  nothing  but  red-tape  methods  with  an  army  of 
clerks  and  other  non-producers  principally  employed  in  making 


'      MANAGEMENT  II7 

written  reports  and  filling  many  blank  forms.  These  can  see 
no  results,  in  increased  profits,  from  this  type  of  manage- 
ment. They  see  only  the  means  for  accomplishing  an  end; 
they  see  the  machinery  and  not  the  finished  product;  the  ma- 
chinery looks  complicated  and  they  mistake  it  for  the  product. 
The  machinery  is  only  incidental;  it  is  not  scientific  man- 
agement, it  is  only  the  means  for  securing  scientific  manage- 
ment. 

There  are  managers  of  the  old  school  who  believe  in  the 
''  good,  old-fashioned  way.'*  These  know  nothing  of  scien- 
tific methods  and  they  have  little  patience  with  those  who 
advocate  changes.  Why  do  these  managers  tolerate  a  drafting 
room  or  a  designing  staff?  Why  not  return  to  the  good, 
old-fashioned  rule-of-thumb  methods  and  the  drafting  work 
done  by  the  superintendent  and  foreman  on  the  floor  of  the 
shop?  There  is  just  as  much  reason  for  this  as  for  the  anti- 
quated shop  methods.  Just  as  much  money  can  be  saved  by 
scientific  methods  in  the  shop  as  has  been  saved  by  scientific 
methods-  in  design  work. 

Under  these  conditions  it  is  not  remarkable  that  progress 
is  slow.  As  the  aims  of  those  who  advocate  scientific  manage- 
ment are  more  generally  known,  much  of  the  opposition  will 
disappear. 

If  scientific  management  be  properly  defined,  this  definition 
can  be  applied  to  the  various  forms  of  management  in  use, 
or  that  may  be  proposed,  and  the  bogus  and  real  determined. 
It  is  nothing  more  than  a  strict  application  of  the  principles 
of  good  management.  The  details  must  be  made  to  suit  the 
requirements  of  each  case.  There  can  be  no  hard  and  fast 
rule.  Each  problem  must  be  carefully  studied,  and  the  meth- 
ods made  to  fit  the  requirements. 

Mr.  Taylor  has  concisely  defined  management  as  *'  knowing 
exactly  what  you  want  men  to  do  and  then  seeing  that  they 
do  it  in  the  best  and  cheapest  way." 

This  definition  may  be  elaborated,  as  follows : 


Il8  COST    KEEPING    AND    SCIENTIFIC  •  MANAGEMENT 

Scientific  Management  provides: 

First :  —  A  careful  analysis  to  determine  before  work  is  un- 
dertaken, exactly  what  is  to  be  accomplished. 

Second:  —  The  determination  of  the  best  way  to  accomplish 
the  work  in  the  quickest  time  at  the  lowest  cost. 

Third :  —  The  employment  of  the  best  machines,  best  facili- 
ties, and  the  best  men  available  to  carry  out  the  work  in  the 
best  way,  as  previously  determined. 

Fourth :  —  Cordial  cooperation  between  employers  and  em- 
ployees, in  order  that  both  may  put  forth  the  best  efforts 
to  secure  low  production  costs. 

Fifth:  —  An  accurate  record  of  the  cost  of  the  work  in  such 
detail  that  the  various  elements  of  cost  may  be  quickly  de- 
termined. 

No  doubt  many  managers  will  exclaim  that  there  is  noth- 
ing new  in  this  definition.  They  consider  the  principles  enun- 
ciated so  simple,  so  elementary,  so  plain  to  everyone,  that 
they  are  surprised  that  anyone  should  write  on  this-  subject. 
They  are  amused  that  the  high-sounding  term  ''  Scientific 
Management  "  should  be  applied  to  what  is  nothing  more  than 
good  management.  They  are  satisfied  that  their  establish- 
ments have  been  managed  for  years  in  accordance  with  these 
principles. 

These  are  correct,  that  Scientific  Management  is  nothing 
more  than  good  management,  but  are  they  correct  that  this 
is  the  system  of  management  generally  followed?  There  is 
little  doubt  that  in  the  majority  of  shipyards,  machine  shops, 
foundries,  etc.,  throughout  the  country  the  requirements  of 
scientific  management  as  define*!  above  are  not  obtained,  yet 
owners  and  managers  do  not  realize  this.  Before  defects  can 
be  corrected  they  must  be  known :  before  an  owner  or  manager 
asserts  that  the  system  of  management  which  he  employs  se- 
cures the  results  obtained  by  scientific  management  he  should 
make  a  careful  investigation  of  his  own  plant  and  analyze  his 
methods,  or,  better  still,  have  someone  in  whom  he  has  confi- 
dence make  this  investigation. 


MANAGEMENT  I  IQ 

Is  a  careful  analysis  made  of  the  work  to  be  accomplished 
before  the  work  is  undertaken? 

In  new  work  drawings  are  supplied,  and  in  manufacture 
work  these  are  usually  in  great  detail.  Frequently,  however, 
the  so-called  drawings  are  merely  outlines  which  are  given 
to  a  workman  with  general  instructions.  The  workman  has 
to  study  out  the  details  and  in  some  cases  has  to  make  sketches 
from  which  he  works.  Is  he  best  fitted  for  this  work?  Is 
it  economical  to  employ  him  on  this  class  of  work?  Fre- 
quently the  workman  encounters  a  difficulty  which  he  cannot 
overcome.  He  wastes  much  time  vainly  trying  to  find  a 
way  out,  and  is  finally  forced  to  go  to  the  foreman  for  infor- 
mation. The  foreman  is  engaged  with  other  duties  and  it 
may  be  some  time  before  he  can  give  the  question  attention. 
Perhaps  the  foreman  cannot  solve  the  difficulty,  and  he  too 
wastes  time  trying  to  do  so,  and  is  finally  forced  to  go  to  the 
drafting  room,  which  should  have  supplied  the  information 
in  the  first  place. 

In  repair  work  it  is  the  exception  that  a  careful  analysis  is   | 
made  of  the  work  to  be  accomplished  before  the  job  is  under-  ' 
taken.    The  general  trouble  is,  of  course,  known,  but  the  actual   j 
work  to  be  accomplished  is  not  determined  before  the  work  is   | 
begun.     The  general  rule  is  to  assign  the  work,  with  general 
instructions,  to  a  competent  mechanic.     The  workman  then 
begins  to  tear  apart  and  he  himself  decides  on  much  of  the 
work.     Soon,  however,  he  strikes  something  which  he  cannot 
decide.     He  tells  the  foreman  of  this  and  the  job  is  held  up 
until  a  decision  is  reached.     Often  the  foreman  does  not  care 
to  make  a  decision  and  he  refers  the  question  to  the  superin- 
tendent.    The  latter  has  many  such  questions  to  decide  and 
many  other  duties.     It  may  be  several  days  before  the  work- 
man gets  definite  instructions.     In  the  meantime  the  job  is 
dragging  or  is  actually  held  up.     When  work  is  carried  out 
in  this  manner,  the  machine  work  is  done  as  it  develops,  cast- 
ings or  forgings  are  ordered  when  it  Is  found  that  they  are 
needed,   and  material   is   not  ordered   from  store   until   it   is  j 
actually    required  by  the   workman.     This   procedure   causes 


I20  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

delay  after  delay;  the  workman  attempts  to  appear  busy;  if 
the  foreman  sees  that  nothing  is  accomplished  while  the  work- 
man waits  for  information,  machine  work,  forgings,  or  ma- 
terial, he  may  take  the  workman  away  from  the  job  until 
the  material  or  information  arrives,  but  it  is  probable  that  the 
workman  will  successfully  kill  time  until  he  can  proceed. 

If  a  record  is  kept  of  the  time  spent  by  the  workman  in 
hunting  for  information  and  hunting  for  tools,  and  the  time 
wasted  waiting  for  machine  work,  castings,  forgings  and  other 
material,  it  will  be  found  that  this  time  in  many  cases  actually 
exceeds  the  time  required  to  do  the  work.  If  the  large  final 
cost  of  the  job  attracts  the  attention  of  the  manager,  he  can- 
not discover  where  the  money  has  gone.  He  knows  that  the 
cost  is  far  too  great  and  when  he  takes  the  foreman  to  task  the 
blame  is  usually  placed  on  the  workman,  who  may  be  a  com- 
petent, hard-working  mechanic.  It  is  not  his  fault;  it  is  the 
fault  of  the  system  under  which  he  works.  Superintendents 
and  foremen  will  deny  that  these  faults  exist;  each  will  state 
that  there  are  no  delays  of  this  kind.  These  conditions  are 
bound  to  exist;  they  cannot  be  avoided  under  the  system  of 
shop  management  usually  employed. 

It  must  be  admitted  that  the  work  to  be  done  must  be  ac- 
curately determined  by  someone.  Is  it  best  to  have  it  de- 
termined by  the  workman  as  the  work  progresses?  Is  it 
profitable  to  employ  a  mechanic  on  work  of  this  character? 
The  work  to  be  accomplished  must  be  determined,  and  the 
logical  way  —  the  scientific  way  —  is  to  have  this  carefully 
done  before  the  job  is  started.  If  it  is  necessary  to  entirely 
dismantle  a  machine  to  discover  what  is  to  be  done,  do  this 
before  men  are  put  on  the  job  proper.  Tear  down  the  ma- 
chine, have  competent  men  determine  exactly  what  is  to  be 
done,  order  material,  castings,  and  forgings  and  the  neces- 
sary machine  work,  and  do  not  start  the  job  until  this  is  done. 

Are  the  best  methods  for  accomplishing  the  work  determined 
before  the  work  is  undertaken? 

The  second  requirement  of  good  management  naturally  fol- 
lows the  first;  after  the  work  to  be  done  has  been  determined, 


MANAGEMENT  121 

the  best  way  of  doing  the  work  should  be  determined.  There 
are  very  few  shops  where  any  effort  is  made  to  determine 
the  best  means  for  accomphshing  the  work.  The  mechanic 
who  has  the  job  decides  in  many  cases  the  methods  to  be  fol- 
lowed. Mr.  Fred  W.  Taylor  has  gone  into  this  fully  and 
has  clearly  shown  that  it  is  impossible  for  the  mechanic  to 
determine  in  machine  operations  the  best  feed,  depth  of  cut, 
and  speed.  Mr.  Taylor  has  proved  the  enormous  savings  that 
can  be  effected  by  having  these  determined  by  someone  who 
is  competent  to  do  this.  Little  consideration  or  thought  is 
given  in  many  shops  to  the  class  of  machine  to  which  work 
should  go.  The  work  is  often  assigned  to  a  machine  because 
the  operator  at  that  machine  is  nearly  out  of  a  job. 

In  a  shop  under  my  supervision  I  noticed  that  frames  for 
water-tight  doors  were  faced  on  a  planer.  I  suggested  to 
the  foreman  that  they  could  be  done  more  quickly  on  a  slab 
milling  machine  which  was  idle.  He  assured  me  that  this 
had  been  carefully  considered.  This  is  the  answer  you  expect 
and  it  is  the  one  you  will  nearly  always  get.  The  job  was 
changed  to  the  slab  milling  machine  and  the  time  was  cut  in 
half. 

The  selection  of  the  proper  machine  is  only  one  of  the 
many  important  elements  of  the  best  way  of  accomplishing  the 
work.  As  a  general  rule  the  shop  is  run  by  a  foreman  and 
a  few  assistants,  the  number  depending  on  the  size  of  the 
shop.  These  assistants  are  called  from  job  to  job  as  trouble 
develops  and  often  several  jobs  are  waiting  for  the  assistant; 
nothing  is  schemed  out  ahead ;  the  assistants  are  worked  to 
their  limit  and  only  give  their  attention  to  jobs  which  require  / 
immediate  attention;  they  can  do  no  more. 

Are  the  men  best  suited  to  each  class  of  work  employed? 
Is  the  best  use  made  of  machines  and  facilities? 

The  third  element  of  scientific  management  requires  that 
men  be  employed  who  are  best  suited  for  each  class  of  work, 
and  that  machines,  tools  and  other  shop  facilities  shall  be  in 
excellent  condition.  In  almost  any  jobbing  shop,  and  in  many 
large  establishments  there   will  be    found  men   employed   on 


122  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

work  which  can  be  done  equally  as  well  by  boys;  mechanics 
will  be  found  on  work  which  should  be  done  by  trained  labor- 
ers. In  some  places  these  conditions  are  due  to  the  require- 
ments of  labor  unions  or  at  least  to  avoid  any  trouble  with 
the  unions.  In  the  majority  of  cases,  however,  it  is  a  natural 
result  of  the  system  of  shop  management  employed.  While 
it  is  true  that  an  intelligent  laborer  can  be  trained  in  a  few 
weeks  or  in  a  few  months  to  do  certain  classes  of  work  usually 
done  by  mechanics,  he  must  have  instruction  and  assistance. 
If  put  on  the  work  and  left  to  himself  he  will  not  only  spoil 
work,  but  he  will  be  ridiculed  by  his  shopmates  and  will  soon 
become  discouraged  and  give  up  the  job.  In  shops  where  the 
ordinary  system  of  management  is  employed  neither  the  fore- 
man nor  his  assistants  have  any  time  to  train  workmen;  they 
can  only  give  attention  to  the  immediate  pressing  duties. 
Under  these  conditions  it  is  impossible  to  employ  laborers  on 
this  class  of  work.     In  the  ordinary  shop  the  foreman  nearly 

,  always  desires  to  employ  mechanics  on  this  class  of  work.    He 

I  feels  that  mechanics  will  make  fewer  mistakes  and  will  re- 

I  quire  much  less  attention  than  handy  men  or  trained  laborers. 
Under  the  usual  conditions  foremen  cannot  be  blamed  for  wish- 

j  ing  to  employ  skilled  men  on  all  work. 

One  of  the  most  frequent  causes  of  the  excessive  cost  of 
work  is  the  poor  condition  of  machines  and  facilities.  A 
careful  examination  will,  in  many  cases,  show  that  machine 
tools  are  not  in  the  best  condition,  belts  are  poor,  the  supply 

I  of  hand  tools  is  inadequate,  and  facilities  which  would  greatly 

'reduce  costs  are  lacking. 

In  a  large  establishment  which  I  recently  visited,  I  noted 
that  drills,  reamers,  etc.,  furnished  the  workmen  were  not  in 
good  condition.  I  questioned  one  of  the  men  and  he  told 
me  that  it  was  the  exception  to  get  a  good  tool  from  the  tool 
room.  In  the  tool  room  I  found  that  no  inspection  was  given 
the  tools  when  returned  other  than  that  given  by  the  laborer 

jwho  received  them.  Unless  a  tool  was  broken,  or  the  edge 
completely  gone,  it  went  back  to  the  racks  for  re-issue.  A 
casual  inspection  showed  the  tools  in  the  racks  in  bad  condi- 


MANAGEMENT  1 23 

tion.  The  tools  were  issued  to  high-priced  mechanics  and 
they  were  expected  to  produce  results.  The  men  worked  at 
"day  work"  and  it  did  not  matter  to  them.  Piece  work  ) 
would  have  opened  the  eyes  of  the  management  to  the  con-  ' 
dition  of  the  equipment.  The  assistant  foreman  in  charge 
of  the  part  of  the  shop  in'wdiich  the  tool  room  was  located 
and  in  charge  of  the  tool  room,  stated  that  when  the  men  em- 
ployed on  the  grinders  ran  out  of  a  job  they  went  over  the 
tools  stored  in  the  racks  and  "  touched  them  up."  Can  one 
believe  these  conditions  possible?  This  was  found  in  a  large 
establishment  which  employs  several  thousand  workmen. 

Is  there  cordial   cooperation  between   employers  and   em- ,  > 
ployees  to  increase  output  and  reduce  production  costs? 

The  fourth  element  of  good  management  is  cooperation 
between  employer  and  employees.  This  is  the  most  important 
element  of  management  and  it  is  entirely  lacking  in  the  great 
majority  of  shops.  In  many  shops  excellent  relations  exist  be- 
tween the  management  and  the  workmen,  but  this  is  not  co- 
operation. Cooperation  has  two  sides,  and  many  employers 
see  but  one  side ;  they  believe  in  the  men  cooperating  with  the 
management  to  obtain  low  production  cost,  but  they  do  not 
think  that  it  is  any  part  of  the  duty  of  the  management  to  co- 
operate with  the  men  to  enable  them  to  earn  high  wages. 
True  cooperation  cannot  be  obtained  unless  there  are  mutual 
benefits.  If  an  employer  expects  his  men  to  assist  in  securing 
low  production  costs,  he  must  assist  the  men  in  securing  high 
wages.  Mr.  Taylor,  in  his  papers  and  books  attaches  the 
greatest  importance  to  this  part  of  the  subject;  by  his  system 
and  his  methods  he  has  been  able  to  bring  about  true  coopera- 
tion between  workmen  and  management  and  this  is  because 
each  obtains  that  for  which  he  is  striving  —  the  workman 
high  wages,  and  the  management  low  labor  cost. 

The  fifth  element  of  good  management  is  an  accurate  rec- 
ord of  the  cost  of  the  work.  This  is  obtained  in  very  few 
establishments  other  than  strictly  manufacturing  shops,  and  in 
many  of  these  accurate  costs  are  not  obtained.  This  element 
has  already  been  considered  in  some  detail. 


l^ 


124  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

To  follow  the  principles  of  good  management  is  not  a 
simple  problem.  If  owners  and  managers  will  be  honest  with 
themselves  and  carefully  examine  the  operation  of  their  plants 
the  great  majority  will  find  that  the  essential  requirements  of 
scientific  management  are  not  met.  It  must  be  admitted  that 
these  requirements  are  essential;  practically  all  are  willing  to 
accept  these  principles.     Then,  why  not  enforce  them? 

When  the  owner  or  manager  really  studies  these  principles 
as  applied  to  his  business  he  discovers  that  it  is  not  a  simple 
problem  to  carry  them  out ;  he  sees  that  it  will  require  a  com- 
plete reorganization  of  his  staff  to  do  this;  he  sees  that  he 
will  require  expert  help  to  make  the  changes  necessary  and 
that  it  will  require  a  large  staff  to  carry  on  the  work  after 
the  changes  are  made.  This  will  cost  money  —  in  some  cases 
a  great  deal  of  money.  He  is  now  making  a  reasonable 
profit;  he  dislikes  changes  and  this  is  one  which  will  involve 
calling  outside  help,  actually  turning  over  for  the  time  being 
the  control  of  a  large  part  of  the  management  to  an  outsider. 
This  will  cause  friction  and  opposition  from  many  of  his 
permanent  staff.  It  requires  courage  and  the  strength  of  his 
convictions  to  make  a  change  of  this  kind.  If  he  consults 
with  his  staff  every  argument  will  be  used  to  prevent  the 
change.  They  consider  it  a  reflection  on  their  management; 
they  see  trouble  and  perhaps  danger  ahead  for  themselves. 

Before  making  the  decision  that  it  is  not  worth  while,  the 
manager  should  make  a  careful  investigation.  He  is  probably 
an  able  man  who  has  had  much  shop  experience ;  he  has 
risen  on  account  of  his  ability.  For  a  number  of  years,  being 
a  competent  manager,  he  has  not  devoted  his  time  to  details; 
he  has  been  occupied  with  the  big  affairs  of  management 
and  has  only  been  dealing  with  the  exceptions  in  the  shops. 
Let  him  turn  over  the  management  to  an  assistant  as  if  he 
were  going  to  the  mountains  for  a  month ;  then  go  into  the 
shops  instead.  Don't  let  him  concern  himself  with  the  man- 
agement; don't  let  him  be  drawn  into  it.  This  will  be  diffi- 
cult, but  for  the  success  of  the  plan  I  propose  it  is  necessary. 


MANAGEMENT  I25 

He  is  no  longer  the  manager  but  is  a  shop  expert  making  a 
critical  examination  of  his  own  plant. 

Select  a  job  in  progress  —  preferably  a  repair  job;  take 
this  work  and  study  it  from  beginning  to  end.  No  doubt  the 
foremen  and  assistants  will  give  the  greater  part  of  their  at- 
tention to  it,  but  that  will  make  little  difference.  He  will 
find  delays,  lack  of  facilities,  waits  for  material,  poor  methods, 
lack  of  proper  information  for  carrying  on  the  work,  and  he 
will  see  on  every  side  where  money  can  be  saved.  Take  a 
new  job  in  progress,  follow  it  from  the  raw  material  to  the 
finished  article.  Find  out  when  the  material  was  ordered, 
who  ordered  it  and  how  he  obtained  the  necessary  informa- 
tion. Find  out  how  the  material  was  obtained  from  the  store- 
house, when  it  arrived  in  the  shop  and  what  is  the  next  step. 
Study  each  of  these  details,  get  all  of  the  facts.  At  each 
step  study  to  see  the  improvement  that  can  be  made.  Follow 
this  job  through  the  shop  —  department  to  department  — 
shop  to  shop  —  in  the  same  manner.  No  matter  if  every 
foreman  and  assistant  are  concentrated  on  the  job,  he  will  find 
enough  lost  money  to  open  his  eyes. 

At  the  same  time  note  what  is  happening  with  other  jobs 
in  the  shop  while  the  foremen  are  concentrated  on  the  par- 
ticular jobs  which  he  is  analyzing.  Let  him  examine  the  ma- 
chine tools  and  find  out  in  detail  how  they  are  kept  up.  Ex- 
amine closely  the  condition  of  the  belts  and  find  out  who. is 
responsible  for  their  condition.  Take  a  machine  at  random, 
put  in  some  high-speed  tool  steel  and  put  on  a  test,  using  cut, 
feed  and  speed  which  he  knows  should  be  possible.  See  if 
the  belt  will  pull  it.  See  if  the  machine  is  in  condition  to 
stand  the  test.  Examine  the  castings  from  the  foundry  to  see 
if  the  patternmaker  has  provided  too  much  finish.  See  how 
this  finish  is  removed;  see  if  on  brass  castings  more  cuts  are 
made  than  are  required.  See  if  unimportant  dimensions  are 
marked  on  the  drawings.  Isn't  it  a  fact  that  men  at  machines 
are  taking  as  much  care  to  finish  to  unimportant  dimensions 
as  to  important  dimensions?     Examine  carefully  the  small- 


126  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

tool  equipment;  take  out  the  tools  from  the  racks  in  the  tool 
room  and  examine  their  condition. 

If  managers  will  make  the  examination  suggested,  I  am 
satisfied  that  before  two  weeks  have  passed  many  will  be 
ready  to  hunt  for  new  foremen.  It  is  not  the  fault  of  the 
foreman ;  it  is  the  system.  Go  to  the  root,  don't  scratch  on 
the  surface.  The  best  foreman  on  earth  can  not  produce  the 
best  results  with  the  system  in  use.  The  system  must  be 
changed ;  scientific,  common-sense  methods  must  take  the 
place  of  the  haphazard,  go-it-blind  methods  now  followed. 


CHAPTER  X 
Wasted  Time  Detected  by  Time  Studies 

If  time  wasted  by  employees  can  be  eliminated  there  will  not 
be  so  much  complaint  of  the  high  cost  of  living  Mr.  H.  L. 
Gantt  in  his  book,  "  Work,  Wages  and  Profits/'  has  shown  that 
the  inefficiency  of  labor  has  an  important  bearing  on  the  pres- 
ent high  cost  of  living.  Wasted  time  is  the  principal  reason 
for  inefficient  labor. 

Very  few  owners  or  managers  realize  that  an  enormous 
amount  of  time  is  wasted  by  men  in  their  employ.  They 
know,  of  course,  that  some  labor  is  wasted,  but  there  is  no 
record  of  the  amount  of  this,  and  it  is  generally  assumed  that 
this  is  an  unavoidable  loss.  If  an  accurate  record  can  be 
made  of  the  actual  productive  working  time  of  each  employee, 
and  the  total  productive  time  compared  with  the  payroll  time, 
the  difference  will  be  found  to  be  very  large.  The  losses  due 
to  this  difference  will  be  so  great  that  no  manager  will  be 
content,  once  he  has  the  information,  to  consider  it  an  un- 
avoidable loss,  but  will  ascertain  the  cause,  and  seek  a  remedy. 

Wasted  time,  while  due  to  many  causes,  may  be  classed 
under  four  general  heads,  viz. : 

Loafing.  Under  this  head  there  are  the  wastes  due  not  only 
to  men  deliberately  loafing,  but  also  the  losses  due  to  men 
soldiering  or  nursing  their  jobs.  With  many  men  killing- 
time  is  almost  an  art.  Very  often  men  are  apparently  in- 
dustrious, but  the  amount  of  work  accomplished  is  small. 

In  the  average  well-conducted  factory  the  losses  due  to 
men  deliberately  loafing  are  comparatively  small,  but  those 
due  to  men  soldiering  are  large.  This  is  a  waste  which  is 
not  easy  to  detect,  and  the  remedy  is  difficult. 

127 


128  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

Mr.  Fred  W.  Taylor,  in  one  of  his  papers  before  the  So- 
ciety of  Mechanical  Engineers,  on  ''  Shop  Management," 
says,  "  So  universal  is  soldiering  for  this  purpose  (to  keep 
employers  ignorant  of  how  fast  work  can  be  done)  that 
hardly  a  competent  workman  can  be  found  in  a  large  estab- 
lishment, whether  he  works  by  the  day  or  on  piece  work, 
contract  work,  or  under  any  of  the  ordinary  systems,  who 
does  not  devote  a  considerable  part  of  his  time  to  studying 
just  how  slow  he  can  work  and  still  convince  his  employer 
that  he  is  going  at  a  good  pace." 

Employment  on  Unsuitable  Work.  Under  this  head  are  losses 
due  to  the  employment  of  men  on  work  which  can  be  more 
economically  performed  by  others.  An  example  of  waste 
due  to  this  cause  is  a  workman  making  sketches  from  which 
to  work,  which  is  not  infrequent  in  jobbing  repair  shops. 
Other  examples  are ;  workmen  grinding  their  tools,  lacing 
belts  for  their  machines,  going  to  the  tool  room  for  tools, 
and  repairing  break-downs  of  their  machines.  Under  this 
head  should  also  be  included  waste  due  to  the  workman 
doing  much  preparatory  work  before  he  can  undertake  the 
actual  work  which  has  been  assigned  to  him,  such  as  the 
preparation  of  the  machine  and  tools  for  the  job,  hunting 
information  as  to  exactly  what  is  required,  or  hunting  for 
material. 

The  losses  under  this  head  in  the  average  shop  are  us- 
ually large.  They  are  not  only  due  to  wasted  labor,  but 
are  also  due  to  wasted  machine-tool  time. 

Lost  Time  due  to  Unnecessary  Waits.  Under  this  head  are 
losses  due  to  waits  on  account  of  lack  of  information  or 
lack  of  material.  There  is  also  a  loss,  which  is  much 
larger  than  is  suspected,  due  to  delays  in  the  assignment  of 
the  next  job. 

There  is  little  excuse  for  the  losses  under  this  head,  yet 
in  the  average  jobbing  shop  the  waste  due  to  these  causes  is 
not  inconsiderable. 

Poor  Equipment.  The  losses  under  tliis  head  are  due  to  time 
wasted  on  account  of  poor  arrangement  of  tools  or  equip- 


WASTE    TIME    DETECTED    BY    TIME    STUDIES  I2g 

ment,  inferior  equipment,  or  lack  of  necessary  tools  and 
facilities. 

A  furnace  improperly  placed  in  relation  to  a  steam  ham- 
mer will  cause  unnecessary  steps  on  the  part  of  the  men 
which  may  result  in  considerable  wasted  time. 

A  grouping  of  machine  tools  which  requires  work  to  go 
back  over  the  same  route  several  times  causes  delay  and 
wasted  time. 

Break-downs  of  machine  tools  are  frequent  sources  of  loss. 
Poor  belting,  or  lack  of  attention  to  belts,  not  only  cause 
stoppages  due  to  breaking  of  belts,  but  also  large  losses  due 
to  the  poor  pulling  capacity  of  the  belt,  which  prevents  the 
machines  working  to  anywhere  near  their  capacity. 

Time  is  frequently  wasted  on  account  of  lack  of  necessary 
equipment,  as  an  insufficient  number  of  steam  hammers  will 
cause  losses  due  to  smiths  waiting  for  a  hammer,  and 
further,  furnishes  an  excuse  to  cover  soldiering  or  loafing. 

The  progressive  manager  must  know  what  is  taking  place 
in  his  plant,  if  he  expects  to  obtain  satisfactory  results.  He 
must  know  the  losses  due  to  loafing;  which  are  the  faults  of 
the  workmen.  He  must  know  the  loss  due  to  men  waiting 
for  information,  material  or  jobs;  which  is  due  to  faults  of 
organization.  He  must  know  the  loss  due  to  poorly  ar- 
ranged or  imperfect  plant  equipment  or  lack  of  equipment; 
which  is  a  fault  of  the  management. 

Before  difficulties  can  be  removed  or  overcome,  a  manager 
must  first  be  convinced  that  they  exist.  Before  he  can  select 
and  apply  corrective  measures  he  must  know  the  extent  and  na- 
ture of  each  loss.  With  this  information  he  knows  the  remedy, 
or  if  he  does  not,  he  is  in  a  position  to  search  until  he  finds  it. 

Many  managers  fail  on  account  of  guesswork.  They  guess 
at  the  cause,  and  guess  at  the  remedy,  and  failure  is  inevita- 
ble. A  manager  may  know  that  the  output  is  small  and  that 
manufacture  costs  are  high;  competitive  selling  prices  will 
usually  tell  him  this  much.  But  unless  he  knows  the  cause, 
he  must  necessarily  guess  at  the  remedy.     In  guessing  at  the 


130  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

remedy  the  entire  blame  is  usually  placed  with  the  employees, 
either  workmen  or  foremen,  or  with  both;  when,  in  reality, 
the  greater  part  of  the  blame  should  be  placed  with  the  man- 
agement. 

Under  these  conditions  the  first  guess  for  the  remedy  is 
an  attempt  to  drive  the  men  to  greater  efforts  —  to  increased 
output.  This  is  doomed  to  failure;  workmen  do  not  respond 
to  drive  methods.  They  know,  better  than  the  management, 
that  the  reason  for  low  output  is  due  in  a  great  measure  to 
faults  for  which  they  are  not  responsible;  faults  due  to  poor 
organization,  poor  equipment  or  poor  management.  There 
is  no  action  which  a  manager  can  take  that  will  do  more  harm 
than  to  blame  the  workmen  as  a  whole  with  faults  which  be- 
long elsewhere.  They  resist  the  drive  methods ;  they  become 
dissatisfied  and  sullen,  or  even  destructive  when  there  is  little 
chance  of  detection. 

The  proper  procedure  is  to  first  find  the  cause.  This  can 
only  be  accomplished  by  detail  observation.  The  best  means 
for  doing  this  is  by  stop-watch  unit  time  studies.  This 
method  was  first  successfully  followed  by  Mr.  Fred  W.  Tay- 
lor, and  since  then  has  been  used  by  many  others  with  great 
success. 

Even  those  who  do  not  accept  Mr.  Taylor's  teachings  in 
their  entirety,  must  admit  the  great  advantages  to  be  gained 
from  unit  time  studies. 

A  manager  should  have  exact  knowledge  of  the  amount  of 
time  wasted  and  the  cause  of  the  loss.  This  information 
can  be  obtained  from  time  studies.  There  will,  of  course, 
be  less  time  wasted  than  is  usual,  on  account  of  the  men  doing 
better  while  under  observation ;  but  notwithstanding  this, 
the  losses  exposed,  the  defects  in  organization  and  equipment 
brought  to  light,  will  astonish  even  the  most  skeptical  man- 
ager. He  will  immediately  see  the  necessity  for  improvement. 
He  will  wonder  how  it  has  been  possible  for  him  to  miss  so 
many  glaring  defects  for  so  long;  many  of  which  can  be 
easily  and  quickly  corrected. 

Improvement  will  begin  from  that  date,  and  new  light  hav- 


WASTE    TIME    DETECTED    BY    TIME    STUDIES  I3I 

ing  dawned,  the  improvements  will  continue  and  increase,  un- 
til scientific  management  in  that  plant  will  become  a  fact,  not 
a  theory  to  discuss  when  there  is  nothing  else  to  do. 

The  output  of  the  drop  forge  shop  at  the  Mare  Island  Navy 
Yard  was  not  satisfactory.  There  are  no  drop  forgers  on 
the  Pacific  Coast  and  the  one  employed  was  brought  from  the 
East.  He  was  a  man  of  many  years'  experience,  and  the 
quality  of  his  work  was  excellent,  but  the  output  was  far 
below  what  it  should  have  been.  It  was  not  possible  to  employ 
piece  work  or  the  premium  system.  The  usually  followed 
method  of  telling  the  man  that  the  output  must  be  increased 
was  followed,  with  the  usual  result  —  no  improvement.  The 
man  would  have  thrown  up  his  job  and  returned  East  before 
he  would  increase  the  output  and  thereby  admit  that  he  had 
been  soldiering  in  the  past.  This  is  in  accordance  with  human 
nature,  and  human  nature  must  be  studied  if  success  is  to  be 
attained. 

An  experienced  observer  was  assigned  to  discover  the 
trouble,  and  also  the  remedy.  Without  attempting  to  change 
any  of  the  conditions  he  made  s^op-watch  time  studies  of 
every  minute  of  the  forger's  day.  The  form  of  the  obser- 
vation sheet  is  shown  in  Fig.  12  and  is  self-explanatory.  The 
heavy  black  line  in  the  middle  of  the  vertical  columns  repre- 
sents graphically  the  operation  of  the  workman  for  each  ten 
seconds  of  time.  At  the  end  of  each  day  the  sum  of  the 
times  in  each  column  is  obtained  and  a  chart  similar  to  those 
shown  in  Fig.  13  is  made.  This  chart  shows  at  a  glance  the 
actual  productive  time  and  clearly  locates  the  large  losses. 

In  observation  No.  i  of  Fig.  13,  the  productive  time  is 
small,  while  the  time  lost  in  waiting  for  heats  amounts  to 
one-half  the  day.  It  is  clear  that  to  make  any  marked  im- 
provement in  production,  steps  must  be  taken  to  reduce  the 
time  "  waiting  for  heats."     This  must  be  the  point  of  attack. 

The  material  used  is  i^-mch  by  3 j^ -inches,  in  sufficient 
length  to  make  four  forgings.  Three  bars  were  first  placed 
in  the  furnace  lying  flat.  The  operator  forged  three  pieces 
from  each  bar  and  then  tlie  fourth  or  end  of  one  bar,  before 


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WASTE    TIME    DETECTED    BY    TIME    STUDIES  1 33 

putting  in  a  new  cold  bar,  and  as  he  drew  out  the  end  of 
the  others,  new  bars  were  placed  in  the  furnace.  By  this 
method  there  is  considerable  interval  of  time  between  the 
forging  of  the  last  piece  of  the  first  heat  and  the  first  piece 
of  the  second  heat;  this  time  being  required  for  the  second 
heat  to  reach  the  required  temperature. 

When  questioned  regarding  his  methods  the  operator  claimed 
that  the  furnace  could  not  heat  faster.  The  furnace  was  ex- 
amined and  found  to  be  in  excellent  condition.  If  the  state- 
ments of  the  operator  are  correct  it  will  require  a  larger  fur- 
nace to  reduce  the  excessive  waiting  time.  It,  however,  was 
not  believed  that  the  operator's  estimate  of  the  heating  ca- 
pacity of  the  furnace  was  correct. 

Six  bars  were  then  placed  in  the  furnace  07t  edge,  for  the 
working  heat.  The  bars  had  three  pieces  forged  from  each, 
and  as  each  bar  was  taken  from  the  furnace  for  the  last  piece, 
it  was  replaced  by  a  cold  bar.  The  furnace  did  its  part  of  the 
work  well  and  no  difficulty  was  experienced  in  obtaining  a 
forging  heat  quickly. 

By  the  new  method  twenty-four  pieces  were  forged  from 
each  heat  instead  of  twelve,  and  the  interval  between  heats  was 
reduced  one-half. 

The  results  obtained  from  the  second  method  of  operation 
are  shown  on  the  chart,  Observation  No.  2  in  Fig.  13,  and  the 
large  increase  in  production  is  graphically  represented.  The 
output  was  increased  from  180  forgings  per  day  to  320. 

No  doubt  some  will  claim  that  it  did  not  require  time 
studies  to  locate  a  fault  that  should  have  been  apparent  to 
the  foreman;  some  will  claim  that  the  superintendent  should 
have  noticed  the  trouble  and  immediately  applied  the  remedy; 
and  that  with  competent  foremen  and  a  superintendent  of  ex- 
perience time  studies  are  a  useless  expense. 

In  nearly  all  cases  after  a  trouble  has  been  located,  and 
the  remedy  found,  it  seems  simple.  The  defect  stands  out 
conspicuously,  the  remedy  appears  self-evident,  and  surprise 
is  expressed  that  the  trouble  should  have  continued  for  so 
long  a  time  without  discovery. 


134  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

The  example  given  is  selected  because  the  defect  was  glar- 
ing, because  the  remedy  is  simple. 

It  does  seem  strange  that  foremen,  superintendents  and 
managers  pass  over  day  by  day,  month  after  month,  faults 
as  glaring  as  the  one  exposed  in  the  example  given.  Yet, 
these  glaring  defects  are  passed  over,  and  may  continue  for 
years. 

Any  manager  who  believes  that  few  defects  exist  in  his 
pljmt  is  deceiving  himself;  he  is  retarding  progress  and  better 
efficiency  by  these  beliefs.  Let  him  try  a  few  stop-watch  ob- 
servations and  he  will  discover  many  faults  as  striking  as  the 
one  given. 

Time  studies  bring  to  the  attention  of  the  manager  faults 
which  he  does  not  believe  exist,  faults  so  grave  that  he  does 
not  believe  it  possible  for  them  to  exist  in  his  establishment. 
Without  these  studies  these  faults  may  continue  undiscovered 
for  years.  With  these  investigations,  the  faults  are  brought 
to  light  and  the  remedy  stands  out,  as  bright  as  the  noon-day 
sun. 

While  the  principal  value  of  time  studies  is  in  exposing 
defects  in  methods,  organization  and  equipment,  and  pointing 
out  the  remedy,  they  are  also  of  value  in  that  they  point  out 
fundamental  conditions  under  which  the  work  is  accomplished, 
and  cause  study  and  investigation  to  be  devoted  to  bettering 
these  fundamental  conditions. 

In  a  large  blacksmith  shop  at  the  Mare  Island  Navy  Yard 
time  studies  disclosed  the  usual  glaring  defects;  many  of 
which  were  immediately  corrected.  They  also  exposed  the 
very  large  amount  of  time  in  which  the  smiths  are  not  work- 
ing at  the  hammer  or  the  anvil,  but  are  tending  their  fires  or 
waiting  for  a  heat.  Improvement  was  made  by  requiring 
better  supervision,  which  produced  closer  attention  on  the  part 
of  the  men,  but  the  unavoidable  loss  was  large. 

To  produce  further  appreciable  improvement,  required 
changes  in  the  fundamental  conditions  which  will  reduce  the 
time  required  to  take  the  heats. 

Coal  was  the  fuel  used,  and  I  gave  careful  consideration 


WASTE    TIME    DETECTED    BY    TIME    STUDIES 


135 


I- 


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Vl 


I 


I 


136  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

to  the  subject  of  improvement  in  the  quality  of  the  fuel. 
After  much  study,  investigation,  and  many  experiments  it 
was  determined  that  crude  oil  can  be  successfully  burned,  not 
only  in  furnaces,  but  also  in  open  blacksmith  forges.  The 
first  blacksmith  shop  in  the  world  to  use  oil  exclusively  was 
the  result,  and  this  was  brought  about  by  the  use  of  time 
studies.  With  this  change  the  time  required  to  take  the  heats 
was  greatly  reduced,  and  owing  to  this,  the  output  of  the 
smiths  was  increased  forty  per  cent.  In  addition  to  this  great 
improvement,  the  cost  of  fuel  was  also  reduced  more  than  one- 
half. 

To  obtain  the  best  results,  a  manager  or  an  engineer  should 
be  fully  informed  of  all  fundamental  conditions,  and  all  sur- 
rounding circumstances.  He  is  then  in  a  position  to  take  up 
the  work  intelligently;  he  knows  where  the  large  savings  can 
be  effected.  He  does  not  at  first  bother  with  the  small  sav- 
ings which  may  be  possible,  but  immediately  attacks  the  large 
losses,  in  order  that  he  may  make  the  great  reductions  in  cost 
immediately,  and  will  later  give  his  attention  to  the  small 
losses. 

Stop-watch  time  studies  give  this  information,  and  they 
give  it  in  such  a  way  that  the  remedy  is  pointed  out,  or  at 
least  suggested.  Knowledge  of  conditions,  as  given  by  time 
studies,  is  the  first  step  towards  an  economical  administration ; 
it  is  a  step  which  leads  to  scientific  management. 


CHAPTER  XI 

The  Principles  of  Scientific  Management  Which  can 
BE  Followed  by  a  Manager 

In  recent  hearings  before  the  Interstate  Commerce  Commis- 
sion, the  testimony  of  such  engineers  as  Gantt,  Emerson,  Go- 
ing, Gilbreth  and  others  that  tremendous  improvement  can 
be  made  in  all  classes  of  industrial  work  by  scientific  methods, 
startled  the  newspaper  and  magazine  world.  The  newspapers 
and  magazines  have  given  the  work  of  Mr.  Taylor,  and  other 
progressive  engineers  who  have  followed  his  methods,  wide 
publicity,  and  this  has  excited  the  interest,  not  only  of  engi- 
neers, but  also  of  the  general  public,  in  scientific  management. 
This  will  materially  aid  in  the  advancement  of  the  cause  of 
scientific  management  and  it  is  probable  that  more  progress 
will  be  made  in  the  next  five  years  than  has  been  made  in  the 
past  twenty  years. 

It  will,  however,  be  a  number  of  years  before  the  principles 
of  scientific  management  are  generally  followed.  It  will  take 
time  for  these  principles  to  be  understood,  and  it  will  take 
even  longer  to  master  the  detail  methods  which  should  be 
used  in  applying  these  principles.  Again,  many  managers  and 
engineers  who  have  followed  with  considerable  financial  suc- 
cess the  ordinary  type  of  management  will  at  first  see  little 
reason  for  changing  to  the  new  type. 

It  will  also  be  difficult  to  find  competent  men  to  introduce 
scientific  methods.  It  requires  not  only  ability  but  also  long 
experience  to  become  an  expert  in  Scientific  Management. 
Mr.  Taylor  in  his  paper  on  "  Shop  Management  "  states,  *'  The 
first  step  after  deciding  upon  the  type  of  organization,  should 
be  the  selection  of  a  competent  man  to  take  charge  of  the  in- 
troduction of  the  new  system ;  and  the  manager  should  think 
himself   fortunate  if  he  can  get  such  a  man  at  almost  any 

137 


138  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

price,  since  the  task  is  a  difficult  and  thankless  one  and  but 
few  men  can  be  found  who  possess  the  necessary  information 
coupled  with  the  knowledge  of  men,  the  nerve,  and  the  tact 
required  for  success  in  this  work."  The  services  of  the  few 
men  who  are  competent  to  introduce  this  type  of  management 
will  be  in  great  demand,  and  for  the  next  few  years  the  supply 
of  competent  men  will  not  meet  the  demand. 

Any  manager  who  attempts  to  introduce  this  type  of  man- 
agement without  the  aid  of  an  expert  will  fail,  but  much  can 
be  done  by  managers  to  improve  conditions  which  exist  in 
many  establishments.  In  making  changes  the  steps  taken 
should  always  be  towards  scientific  management;  not  only 
will  these  steps  better  conditions,  reduce  inefficiency,  and 
thereby  reduce  costs,  but  they  will  arouse,  first,  interest,  and 
later,  enthusiasm  for  the  best  form  of  management. 

I  shall  attempt  to  outline  steps  which  can  be  undertaken  by 
the  manager,  and  which  in  thousands  of  shops  will  bring  im- 
provement. 

Mr.  Taylor  lays  emphasis  upon  the  necessity  for  every  man 
in  an  establishment,  high  and  low,  having  a  clearly  defined 
daily  task  laid  out  before  him.  We  must,  however,  creep 
before  we  walk.  In  thousands  of  establishments  the  duties 
of  partners  and  important  officials  are  so  loosely  defined  that 
in  many  cases  it  is  difficult  or  impossible  to  tell  where  the 
work  of  one  ends  and  another  begins.  Before  a  daily  task  can 
be  laid  out,  the  duties  of  each  must  be  clearly  defined.  In 
many  establishments  important  officials  do  not  know  their 
duties;  they,  of  course,  have  duties  assigned  them,  but  they 
cannot  define  with  any  exactness  the  detail  work  that  they 
should  accomplish.  The  superintendents,  foremen,  and  me- 
chanics have  httle  idea  of  the  detail  duties  and  authority  of 
each  official  of  the  company.  These  conditions  lead  to  much 
confusion,  constant  irritation,  many  delays,  and  consequent 
inefficiency.  Many  will  no  doubt  seriously  question  that  the 
description  given  applies  to  the  general  run  of  industrial  estab- 
lishments.    I  hope  that  they  are  right  and  I  am  wrong,  but 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  1 39 

my  observation  leads  me  to  believe  that  the  conditions  stated 
are  more  or  less  general. 

It  is  the  exception  to  find  detailed  written  instructions 
clearly  defining  the  duties  and  authority  of  important  officials, 
much  less  subordinate  officers,  foremen,  assistant  foremen, 
etc.  Many  will  claim  that  even  if  there  are  no  written  in- 
structions, each  man's  duties  and  responsibilities  are  defined, 
and  that  each  knows  the  boundaries  of  not  only  his  own  du- 
ties, but  also  those  of  the  other  important  officials  of  the  es- 
tablishment. This  is  very  rarely  true.  A  test  of  the  correct- 
ness of  this  statement  is  to  require  each  official  to  make  a 
written  statement  defining  in  detail  his  duties  and  responsi- 
bilities ;  also  require  each  to  define  the  general  duties  of  other 
executive  officers  with  whom  he  does  business.  The  general 
manager  should  also  attempt  to  make  a  diagram  showing  the 
important  functions  of  each  member  of  the  organization  and 
their  relations  to  each  other. 

In  many  establishments  these  tests  will  bring  surprising 
results;  it  will  be  found  that  duties  and  responsibilities  over- 
lap and  that  few  have  a  clear  idea  of  their  own  duties  or 
those  of  officers  with  whom  they  each  day  deal.  The  general 
manager  will  also  frequently  find  that  he  has  difficulty  in  mak- 
ing a  satisfactory  diagram  of  the  organization. 

In  establishments  where  these  unsatisfactory  conditions  ex- 
ist the  first  step  is  to  determine  the  duties  and  responsibilities 
of  every  general  and  subordinate  official,  and  it  should  always 
be  borne  in  mind  that  responsibility  should  be  accompanied 
by  its  corresponding  measure  of  authority.  When  the  duties 
of  each  have  been  determined  they  should  be  clearly  defined  in 
writing,  not  only  for  the  information  of  the  official  concerned, 
but  for  the  information  of  all  holding  positions  of  authority. 

A  diagram  of  the  organization  should  also  be  prepared 
which  will  show  the  general  limits  of  authority  and  responsi- 
bility of  each  head  of  department  or  division,  and  will  indi- 
cate their  relations  to  each  other.  This  should  be  posted 
throughout  the  works  in  order  that  everyone  in  the  establish- 


140  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

ment  may  know  the  general  scheme  of  organization,  and  the 
limits  of  authority  of  all  responsible  officers. 

The  organization  should  be  such  that  dissimilar  duties  will 
not  be  assigned  to  the  same  man.  Similar  duties  should,  as 
far  as  possible,  be  brought  together  to  be  performed  by  one 
man  or  group  of  men,  and  the  men  selected  for  these  duties 
should  be  the  ones  who  are  best  qualified  for  the  work.  There 
are  very  few  men  who  excel  in  many  different  lines  of  work. 
Even  with  men  of  great  ability  it  will  be  found  that  they  us- 
ually excel  in  but  one  line  of  work,  and  this  is  the  line  to 
which  they  have  devoted  their  time  and  talents  —  that  on 
which  they  have  specialized. 

In  many  of  the  large  and  important  establishments  through- 
out this  country  little  attempt  is  made  to  carefully  group 
work  of  a  like  nature  under  one  head.  In  some  of  the  largest 
and  most  important  shipyards,  employing  five  thousand  or 
more  men,  the  organization  provides  for  about  half  of  nearly 
a  score  of  shops  to  be  under  the  manager  of  the  Hull  De- 
partment and  half  under  the  manager  of  the  Machinery  De- 
partment. 

The  work  in  some  shops  under  one  manager  is  very  similar 
to  work  in  other  shops  under  the  other  manager.  In  shops 
where  the  work  is  dissimilar  the  same  methods  and  the  same 
type  of  organization  can  be  employed  to  advantage.  The 
erection  work  is  dependent  upon  the  shop  work,  and  very  often 
the  work  in  one  shop  is  dependent  upon  the  work  in  another ; 
to  secure  satisfactory  results  it  is  essential  that  there  should 
be  cordial  coordination  and  cooperation  not  only  between 
the  two  managers,  but  also  between  the  various  shop  fore- 
men. 

The  control  of  these  shops  should  be  vested  in  one  depart- 
ment; there  should  be  one  shop  superintendent  who  has  con- 
trol of  all  shops  and  the  work  in  them.  In  time  this 
superintendent  will  have  a  planning  department  to  direct  all 
operations.  With  this  kind  of  an  organization  tools,  meth- 
ods, etc.,  are  standardized,  and  there  will  be  cooperation  and 
coordination  between  the  shops.     This  is  nothing  more  than 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I4I 

Mr.  Taylor's  functional  foremanship  applied  higher.  The 
shop  superintendent  should  be  chosen  from  men  who  are 
experts  in  shop  management.  He  will  bring  the  numerous 
shop  organizations  of  the  establishment  into  one  homogeneous 
organization.  He  will  give  the  shops  expert  supervision 
where  before  they  received  little  or  no  supervision  other  than 
that  given  by  the  foreman. 

I  doubt  if  in  any  shipyard  where  the  organization  described 
exists  either  the  manager  in  charge  of  the  Hull  Department 
or  the  manager  of  the  Engine  Department  will  willingly  allow 
the  shops  now  under  their  general  supervision  to  go  under 
the  control  of  a  shop  superintendent  —  even  if  they  know 
that  the  man  to  fill  the  position  is  an  expert.  This  disposition 
is  not  only  due  to  the  natural  inclination  to  hold  on  to  what 
one  has,  but  each  of  these  managers  has  the  fear  that  if 
he  lets  the  shop  go  from  under  his  control  he  will  not  get 
good  service;  he  believes  that  the  work  belongs  to  him  and 
that  he  can  do  it  better  than  anyone  else,  and  believes  that 
if  the  shops  should  go  under  a  shop  superintendent  delays 
in  the  progress  of  work  will  be  the  result. 

This  is  the  same  condition  and  the  same  feeling  that  Mr. 
M.  L.  Cooke  found  among  the  leading  universities  of  this 
country.  Instead  of  functional  duties  Mr.  Cooke  found  that 
important  professors  devote  a  large  part  of  their  time  to 
work  for  which  they  are  not  fitted  and  which  can  better 
be  done  by  others.  Yet  in  nearly  all  cases  these  professors 
wish  to  retain  this  extraneous  work.  Mr.  Cooke  gives  one 
striking  example :  In  one  university  there  are  three  machine 
shops  within  the  college  grounds,  and  each  of  these  is  directed 
by  one  or  more  college  professors,  weighted  down  as  they  are 
with  other  functions  foreign  to  this  one.  Mr.  Cooke  states, 
regarding  the  attitude  of  the  professors  towards  centralized 
management  for  the  shops,  **  Every  one  of  the  professors 
is  firmly  convinced  that,  if  his  particular  shop  were  under  the 
control  of  anyone  outside  his  department,  (i)  he  would  have 
to  wait  longer  for  things,  (2)  the  work  would  not  be  so  well 
done,  and  (3)  would  not  cost  less."     Yet  everyone  who  has 


142  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

experience  in  shop  management  knows  that  centralized  man- 
agement of  these  shops  will  be  of  advantage  not  only  to  the 
university  but  also  to  each  individual  department. 

A  shop  superintendent  who  attempts  to  place  the  shops  on 
a  functional  basis,  encounters  similar  opposition  when  he 
begins  to  rearrange  the  duties  of  the  various  foremen  and 
assistants.  The  belting  in  a  group  of  shops  located  near  each 
other  had  been  cared  for  in  a  systematic  manner  by  a  prop- 
erly instructed  belt  man  with  adequate  equipment,  for  several 
years  with  excellent  results.  It  was  desired  to  extend  the 
system  to  take  in  a  group  of  wood-working  shops  located 
about  three  hundred  yards  away.  The  foreman  joiner  was 
surprised  that  I  should  make  such  a  proposition,  and  after 
making  general  objections  to  the  scheme,  exclaimed,  "  Ac- 
cording to  these  instructions,  if  the  belt  on  the  sticker  breaks, 
no  man  in  the  joiner  shop  is  allowed  to  lace  the  belt,  but  I 
must  'phone  to  the  machine  shop  to  have  the  belt  man  do  a 
little  job  that  can  be  done  by  half  a  dozen  men  in  the 
joiner  shop."  I  answered,  "  Exactly,  Mr.  Smith,  but  we 
don't  expect  belts  to  break."  Mr.  Smith  interrupted  me  before 
I  finished  — *'  But  they  do  break,  I  had  three  break  last 
zveek!"  If  I  had  needed  any  convincing  proof  of  the  need 
of  a  belt  man  in  that  shop  I  had  it  there.  I  explained  to 
Mr.  Smith  that  we  intended  to  prevent  breaks  in  belts,  and 
directed  him  to  make  a  personal  report  to  me  of  every  belt 
failure  in  the  shop  after  the  instructions  went  into  effect. 
He  was  satisfied  that  he  would  make  many  reports,  yet  not 
one  was  made;  there  was  not  a  failure  in  the  shop  for  over 
two  years. 

The  industrial  world  should  free  itself  from  the  slavery 
of  the  idea  that  to  get  a  thing  done  well  you  must  do  it  your- 
self. Every  successful  specialist  is  living  proof  that  this  is 
not  true.  In  functional  management  each  man  performs 
those  functions  which  he  is  best  fitted  to  perform,  and  he 
is  not  allowed  to  do  work  of  which  he  has  not  expert  knowl- 
edge, nor  is  he  allowed  to  do  work  which  can  be  done  as  well 
by  a  man  of  less  value. 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I43 

The  Hull  Manager  and  Engine  Manager  should  realize 
if  they  give  consideration  to  the  subject  that  an  expert  shop 
superintendent  will  in  time  give  far  better  service  than  is 
obtained  under  present  conditions.  Not  only  will  this  change 
be  of  benefit  to  the  whole  plant,  but  it  will  directly  benefit  the 
two  individual  departments.  The  shop  superintendent  must 
make  good  to  retain  his  position.  He  understands  that  every 
delay,  if  but  a  few  hours,  will  now  be  noted,  while  under 
the  old  organization  delays  of  days  went  unnoticed.  In  a 
short  time  there  will  be  no  delays;  work  will  be  so  arranged 
that  when  a  new  job  comes  into  the  shop  a  promise  can  be 
given  of  the  day  on  which  it  will  go  out,  and  the  promise 
will  be  kept. 

This  is  a  change  in  organization  and  methods  which  can 
be  made  by  a  manager,  and  is  one  which  will  bring  excellent 
results,  and  at  the  same  time  is  a  step  towards  scientific  man- 
agement. 

In  a  similar  manner  careful  consideration  should  be  given 
work  assigned  to  all  executive  officers  with  the  view  of 
arranging  for  functional  management.  Each  head  of  depart- 
ment or  division  should  interest  himself  in  the  general  prin- 
ciples of  scientific  management,  and  slowly  but  surely  should 
bring  about  changes  in  his  department  —  each  change  being 
a  step  towards  the  goal  of  scientific  methods.  In  this  man- 
ner improvement  can  be  made,  and  at  the  same  time  a  most 
important  result  will  be  achieved,  that  is,  many  will  become 
interested  in  the  new  form  of  management  and  some  will 
become  enthusiastic;  and  as  the  possibilities  are  month  by 
month  unfolded  all  will  finally  be  convinced  of  the  necessity 
of  obtaining  the  scientific  type  of  management  in  all  of  its 
details. 

It  has  already  been  stated,  and  it  should  be  emphasized, 
that  it  will  be  impossible  for  a  manager  or  a  subordinate  to 
introduce  in  any  establishment  the  scientific  methods  which 
are  advocated  by  Mr.  Taylor  and  his  associates.  This  can 
not  be  done  with  any  success  without  the  services  of  an  expert. 
The  manager  and   heads   of  departments   can,   however,   do 


144  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

much  which  leads  to  scientific  methods,  and  in  this  and  sub- 
sequent chapters  I  shall  describe  methods  which  can  be  under- 
taken by  a  manager,  and  if  followed  will  increase  output. 

If  an  expert  is  finally  employed  to  install  the  system  in  all 
its  details  the  preliminary  work  which  has  been  done  by  the 
manager  will  make  the  path  of  the  expert  easy  and  the  work 
can  be  completed  in  less  time  than  would  otherwise  be  re- 
quired. Not  only  will  the  physical  conditions  in  the  shop 
be  right  for  the  system,  but, .what  is  more  important,  the 
manager  and  his  assistants  will  already  be  convinced  of  the 
advantages  to  be  gained  by  further  extension  of  scientific 
methods.  The  expert  will  therefore  have  little  or  no  oppo- 
sition; on  the  contrary,  he  will  have  assistance  in  every  step. 
Under  these  conditions  he  will  expend  all  his  energy  in  build- 
ing up  and  not  expend  a  great  deal  of  his  time  and  energy 
in  holding  up  the  little  which  he  has  already  built,  which  is 
sometimes  the  case  when  manager  and  assistants  are  not  in 
entire  sympathy   with   the   changes. 

In  undertaking  preliminary  steps  towards  scientific  meth- 
ods, the  manager  and  heads  of  departments  should  confine 
their  efforts  to  changes  which  will  not  antagonize  the  work- 
men. No  attempt  should  be  made  to  establish  a  bonus  system 
of  payment  or  a  piece-rate  system.  This,  together  with  the 
rate-making  department,  should  be  left  for  the  expert. 

Other  changes,  however,  can  be  made  which  will  greatly 
improve  the  unsatisfactory  conditions  which  are  found  in 
many  shops.  To  illustrate,  I  shall  take  a  large  establishment 
like  the  shipyard  to  which  reference  has  been  made  and 
assume  that  a  qualified  shop  superintendent  has  been  ap- 
pointed, and  will  indicate  the  steps  which  he  can  take  to 
improve  conditions. 

The  first  step  taken  by  the  shop  superintendent  is  one  which 
will  be  disapproved  by  the  majority  of  old-time  managers 
and  owners,  for  he  will  immediately  obtain  several  compe- 
tent assistants.  To  many  managers  efficiency  varies  inversely 
as  the  number  of  non-producers,  and  the  efficient  head  of 
department  is  the  one  who  can  show  low  expense  accounts. 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I45 

Sometimes  a  competent  man  in  the  position  of  shop  superin- 
tendent, fearing  adverse  criticism,  will  attempt  to  carry  on 
the  current  work  and  at  the  same  time  make  improvements 
without  the  aid  of  assistants.  This  is  a  mistake  which  is 
not  only  of  disadvantage  to  the  establishment,  but  will  in 
nearly  all  cases  result  disastrously  for  the  superintendent. 
Before  accepting  the  position,  the  general  methods  to  be  fol- 
lowed should  be  outlined  to  the  managernent,  and  it  should 
be  made  clear  that  competent  assistants  will  be  required. 

The  shop  superintendent  will  at  first  have  the  opposition  of 
the  foremen  of  the  several  shops.  This  is  to  be  expected, 
for  while  in  the  past  these  foremen  have  nominally  been  under 
the  supervision  of  the  managers  of  the  two  departments,  they 
have  been  allowed  to  run  the  shops  as  they  saw  fit,  subject 
only  to  the  general  directions  of  the  managers,  while  under 
the  new  regime  the  shop  superintendent  will  actually  control, 
and  he  will  establish  standards  which  must  be  followed.  The 
opposition  will  eventually  disappear,  but  at  first  the  superin- 
tendent will  have  but  little  assistance  from  the  foremen  in 
changes  undertaken.  The  superintendent  must,  therefore,  be 
sure  of  his  ground,  and  a  thorough  study  must  be  made  of 
conditions. 

In  investigating  conditions,  it  is  desirable  that  a  single  duty 
or  investigation  should  be  assigned  to  an  assistant,  and  he 
should  continue  on  this  duty  until  the  desired  results  are  ob- 
tained. For  example,  the  investigation  of  small  tools  should 
be  assigned  to  one  assistant,  belts  to  another,  maintenance  of 
machine  tools  to  another,  or  a  single  assistant  should  take 
up  these  subjects  one  at  a  time. 

It  should  be  remembered  that  while  investigations  and 
changes  are  being  undertaken,  that  the  output  in  the  shops 
must  not  suffer.  The  work  must  be  completed  as  quickly 
and  as  cheaply  as  before,  and  soon  there  must  be  evidence 
,of  improvement.  The  superintendent  at  first  must  devote 
a  great  deal  of  his  time  to  current  work  and  routine  matters, 
and  he  should  in  the  beginning  assign  one  assistant  to  follow 
up  work  and  remove  difficulties  which  cause  delays.     Delay 


146  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

of  work  will  be  the  most  frequent  complaint  and  whether  these 
complaints,  compared  with  previous  performances,  are  just 
or  not,  all  cause  for  complaint  must  be  removed.  Above  all 
things  the  work  must  go  through  the  various  shops  promptly. 

No  changes  should  be  made  until  thoroughly  investigated 
and  the  effects  fully  considered.  The  assistants  assigned  to 
definite  tasks  should  be  required,  after  full  investigation,  to 
make  complete  written  reports  describing  existing  conditions 
and  changes  recommended,  with  a  statement  of  the  probable 
result  of  the  proposed  changes,  if  carried  into  effect.  This 
method  in  the  first  place  trains  the  assistant ;  the  superin- 
tendent will  no  doubt  find  omissions  in  the  reports,  and  points 
which  have  not  been  considered,  and  the  assistant  should  be 
required  to  go  over  the  subject  again;  this  tends  to  make  the 
assistant  thorough.  It  also  insures  that  every  change  will 
be  fully  considered,  and  that  there  will  be  no  snap  judgment. 

The  superintendent,  after  considering  the  report,  should 
make  such  investigation  as  he  considers  necessary  to  verify 
the  statements  of  the  assistant.  He  will  then  decide  the 
changes  to  be  made,  and  will  indicate  these  to  the  assistant, 
who  will  prepare  detail  written  instructions  to  govern  the  new 
methods.  These  will  be  passed  on  by  the  superintendent,  and 
when  approved  by  him  will  be  issued  as  orders  to  the  shops. 

It  will  then  be  the  assistant's  duty  to  not  only  see  that  the 
instructions  are  carried  out,  but  he  must  be  the  instructor 
who  is  to  teach  the  foremen,  assistant  foremen  and  others 
the  new  methods;  he  must  be  ready  to  remove  all  difficulties 
and  must  see  that  the  change  is  accomplished  with  the  mini- 
mum irritation  and  friction.  To  accomplish  satisfactory  re- 
sults it  is  evident  that  the  assistant  must  have  mastered  the 
subject  —  he  must  have  become  an  expert  on  that  particular 
work.  This  is  of  great  importance  and  the  experienced  and 
wise  superintendent  will  satisfy  himself,  before  he  issues  in- 
structions for  the  change,  that  the  assistant  has  in  reality 
mastered  every  detail  and  has  fully  considered  the  effect  of 
every  change  in  methods. 

If  every  proposition  is  fully  considered  in  tlie  manner  indi- 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I47 

cated,  there  will  be  no  going  backward ;  there  will  be  no  put- 
ting changes  into  effect  "  on  trial,"  and  there  will  be  the 
minimum  interference  with  the  work   in  the  shops. 

SMALL    TOOL    EQUIPMENT. 

One  of  the  important  questions  to  consider  is  the  small  tool 
equipment.  In  the  majority  of  shops  an  investigation  of  this 
subject  with  intelligent  changes  will  result  in  great  improve- 
ment. 

The  kinds  of  tool  steel  that  are  to  be  used  for  various  pur- 
poses must  be  determined  and  should  be  made  standard.  It 
is  most  unsatisfactory  to  have  two  or  more  kinds  of  tool  steel 
for  the  same  purpose,  yet  in  many  shops  little  attention  is 
given  to  this  subject.  It  is  very  common  to  see  twist  drills 
of  carbon  steel  and  high  speed  steel  issued  indiscriminately 
from  the  tool  room;  a  workman  will  receive  a  carbon  steel 
drill  and  when  this  is  dulled  it  will  be  replaced  by  a  high  speed 
drill,  or  vice  versa.  Rate  making  or  standard  times  are  ob- 
viously impossible  under  these  conditions. 

Tool  steel  of  uniform  quality  must  be  obtained  for  lathe, 
planer,  shaper  tools,  etc.  The  Navy  Department  has,  with 
the  assistance  of  civilian  experts,  developed  specifications  for 
tool  steel  by  means  of  which  steel  of  uniform  quality  can  be 
obtained  and  at  the  same  time  competition  secured.  The 
specifications  are  not  given  here,  as  they  must  necessarily 
change  with  the  advances  made  in  the  manufacture  of  tool 
steel,  but  they  can  be  obtained  either  from  the  Navy  Depart- 
ment or  the  tool  makers.  In  commercial  shops  it  will  usually 
be  satisfactory  to  select  certain  brands  of  high  grade  tool  steel 
and  adhere  to  these. 

The  quality  of  tool  steel  having  been  settled  the  size  and 
shape  of  tools  for  various  purposes  must  be  determined.  In 
the  average  shop  the  sizes  and  shapes  are  almost  as  numerous 
as  there  are  men  in  the  shops.  The  standard  sizes  should 
be  as  few  as  possible,  yet  should  be  sufficient  for  the  general 
run  of  work.  The  shape  of  tools  has  been  fully  investigated 
by  Mr.  Taylor  and  his  associates,  and  it  is  only  necessary  to 


148  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

follow  the  standards  described  in  Mr.  Taylor's  book,  "  The 
Art  of  Cutting  Metals."  A  grinding  machine  which  will 
accurately  produce  the  standard  shapes  can  be  purchased  at 
reasonable  cost.  It  will  therefore  require  but  little  investi- 
gation to  decide  on  standard  shapes,  and  to  obtain  the  means 
for  obtaining  standard  tools. 

The  next  step  is  to  obtain  an  ample  supply  of  tools,  and 
to  have  grinding  for  all  shops  done  in  a  central  grinding 
room,  with  a  central  tool  issuing  room  adjacent  to  the  grind- 
ing room.  The  dulled  tools  should  be  collected  each  day  from 
the  shop  tool  rooms  and  replaced  with  sharpened  tools.  The 
tools  to  be  ground  are  segregated  and  ground  in  quantities. 

All  grindstones  should  be  removed  from  the  shops  proper, 
and  the  workmen  should  be  prohibited  from  grinding  tools. 
The  grinding  of  all  standard  tools  should  be  accomplished 
in  the  central  grinding  room,  but  special  tools  may  be  ground 
in  the  shop  tool  room.  The  workmen  should  not  be  allowed 
to  go  to  the  tool  room  for  tools,  but  the  tools  should  be 
supplied  to  the  machines  by  tool  boys. 

The  shop  tool  issue  room  should  be  conveniently  located 
and  should  be  arranged  for  a  neat  and  compact  stowage  of 
tools.  There  should  be  a  correct  card  inventory  of  every  tool 
and  appliance  stored  in  the  issue  room  and  this  should  be 
kept  up-to-date.  The  double  check  system  should  be  used 
for  issuing  tools;  the  man's  check  with  his  number  is  hung 
on  the  tool  rack,  while  the  tool  check,  giving  the  name  of  the 
tool,  is  hung  on  a  hook  under  the  man's  number.  In  this  way 
a  tool  can  be  immediately  located,  or  the  number  of  tools 
issued  to  each  man  determined. 

When  edged  tools  are  turned  in  to  the  issue  room  they 
should  not  be  put  back  in  the  racks  on  the  inspection  of  the 
laborer  or  helper  who  issues  tools;  all  edged  tools  turned  in 
should  be  placed  in  tote  boxes,  and  once  a  day  a  competent 
tool  maker  should  visit  the  issue  room  to  inspect  the  tools 
turned  in.  Measuring  instruments  should  be  treated  in  the 
same  manner.  By  this  method  the  tools  issued  are  always 
in  good  condition. 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I49 

The  breakage  of  tools  requires  consideration;  if  men  are 
taken  to  task  every  time  they  break  a  tool,  they  will  nurse  the 
tools,  and  a  reduction  in  output  will  be  the  result;  on  the 
other  hand,  if  no  action  is  taken  regarding  broken  tools  there 
will  be  much  carelessness  and  the  breakage  will  be  large.  A 
middle  course  must  be  pursued;  in  the  case  of  small  taps, 
drills,  or  tools  liable  to  break,  no  action  should  be  taken  when 
a  tool  is  broken  other  than  record  it;  in  the  case  of  a  valuable 
tool,  or  when  it  appears  that  carelessness  is  the  cause,  the  man 
should  be  required  to  submit  on  a  regular  form  a  "  damage 
report "  which  brings  forth  a  full  investigation  of  the  cause 
of  the  breakage. 

At  the  end  of  the  month  there  should  be  posted  in  the  shop 
bulletin  board  a  record  of  tools  broken  during  the  month; 
this  should  contain  the  names  of  the  men  and  the  tools  broken 
by  each ;  a  copy  of  this  record  should  be  furnished  the  shop 
superintendent.  When  men  damage  tools  or  machines 
through  carelessness,  or  habitually  break  small  tools,  the  facts 
should  be  noted  on  the  offender's  record  card. 

The  tool  issue  room  should  be  arranged  so  that  needed 
expansion  can  be  obtained  without  difficulty.  In  time  not 
only  will  tools  be  kept  in  this  room,  but  also  every  appliance, 
every  bolt,  every  block  needed  to  carry  on  the  work  will  be 
stored  here,  and  expansion  of  the  issue  room  will  probably 
be  necessary.  The  reason  for  keeping  all  tools,  appliances, 
etc.,  in  the  tool  room  is  the  necessity  for  standard  conditions, 
which,  with  Scientific  Management,  is  an  essential  requirement. 
The  rate  setter  will  make  a  rate  or  a  standard  time  on  the 
assumption  that  tools,  bolts,  blocking  and  other  appliances 
are  in  perfect  condition.  When  the  workman  goes  to  set  his 
work  and  bolt  it  up  he  finds  the  threads  on  the  bolt  are  burred 
and  he  has  to  use  a  wrench  to  run  the  nut  down,  instead  of 
doing  this  by  hand  as  the  rate  maker  has  estimated;  in  other 
words,  the  conditions  are  not  standard,  and  without  standard 
conditions  there  can  be  no  accurate  rate  setting.  If  bolts, 
blocking,  fittings,  etc.,  are  left  at  the  machines  they  will  not 
be  kept  in  good  condition,  and  it  is  only  necessary  to  inspect 


150  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

such  fittings  at  the  machines  in  ahiiost  any  shop  to  obtain 
ample  verification  of  these  statements. 

There  is  still  another  important  reason  for  keeping  all  tools 
and  fittings  in  the  tool  room.  When  work  is  routed,  and 
detail  instructions  issued  to  the  workmen,  it  will  be  one  of 
the  duties  of  the  planning  department  to  make  a  tool  list 
giving  every  tool,  bolt,  rigging,  etc.,  that  will  be  required  to 
perform  the  work.  It  will  be  the  duty  of  the  tool  issue  room 
to  collect  these  tools,  and  the  duty  of  the  gang  boss  to  see  that 
all  the  tools  in  good  condition  are  delivered  to  the  workman 
before  he  is  ready  to  undertake  the  work.  Unless  all  tools 
and  appliances  are  kept  in  one  place,  that  is,  the  tool  room, 
it  will  be  difficult  for  the  tool  room  keeper  or  the  gang  boss 
to  carry  out  these  duties. 

It  will  not  be  possible  in  the  establishment  under  considera- 
tion to  put  in  effect  the  system  which  requires  the  duties  out- 
lined, but  the  ideal  system  should  always  be  kept  in  view, 
and  every  change  made  should  be  in  the  general  direction  of 
the  ideal  system.  It  should  be  the  hope  and  aim  of  the  shop 
superintendent  and  his  assistants,  and  eventually  of  every 
foreman,  to  reach  the  ideal  system.  If  this  be  always  kept 
in  view,  the  path  of  the  expert  who  finally  comes  to  install 
the  system  in  its  entirety  will  be  an  easy  one. 

In  connection  with  the  small  tool  equipment,  consideration 
should  be  given  to  the  tool-making  and  repair  department,  or 
the  tool  room  proper.  After  considerable  experience  and 
study  of  this  subject  I  am  convinced  that  in  a  machine  shop 
managed  in  accordance  with  scientific  principles  there  is  no 
need  of  a  tool  room,  and  that  all  tool  making  and  tool  repair 
work  should  be  carried  out  in  the  machine  shop  proper.  Spe- 
cial machines  and  specially  qualified  men  will  no  doubt  be 
engaged  at  all  times  on  tool  work,  but  this  is  no  reason  why 
they  should  be  put  in  a  separate  room  and  not  subject  to  the 
same  rules  as  the  shop  proper. 

There  is  much  money  wasted  in  tool  rooms;  the  men  are 
not  under  the  same  discipline  and  the  same  supervision  that 
is  given  the  men  in  the  shop;  the  output  in  the  tool  room  is 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I5I 

usually  lower  than  in  the  shop;  a  great  deal  of  work  is  done 
in  the  tool  room  by  highly-paid  tool  makers  that  should  be 
done  by  low-rate  machinists;  there  is  often  a  duplication  of 
machine  tools  that  is  unnecessary  —  often  there  are  machine 
tools  in  the  tool  room  which  are  rarely  used,  while  they  could 
be  used  to  advantage  in  the  shop.  There  are  tool  rooms 
which  are  not  subject  to  these  criticisms,  but  the  average  is 
about  as  described. 

Is  there  any  good  reason  why  the  tool  makers  should  be 
separated  from  the  shop  proper?  I  am  satisfied  that  there 
is  not;  all  tool  work,  whether  new  or  repair  work,  should 
be  treated  exactly  as  the  other  work  in  the  shop;  it  should 
be  analyzed,  routed  and  rates  fixed  as  will  be  the  case  for  the 
regular  work.  Work  requiring  extreme  accuracy  will  be 
routed  to  the  tool  makers  who  are  best  able  to  do  the  work, 
and  the  planning  department  will  exercise  expert  judgment  in 
this,  as  in  all  matters  over  which  it  has  jurisdiction.  If  the 
tool  room  is  abolished  and  the  scheme  outlined  is  followed, 
it  will  be  found  that  in  a  very  short  time  the  force  of  expert, 
highly  paid  tool  makers  will  be  considerably  reduced,  and  that 
the  output  will  be  equally  as  satis factoiy. 

It  may  not  be  advisable  to  abandon  the  tool  room  until  the 
planning  room  and  all  that  goes  with  it,  is  firmly  established, 
but  in  making  the  preliminary  changes  necessary  in  the  tool 
issue  room  and  tool  room  the  eventual  abandonment  of  the 
tool  room  should  be  kept  in  mind. 

CARE    OF    BELTING. 

Perhaps  next  in  importance  to  the  small  tool  equipment  is 
the  care  of  belting.  The  losses  due  to  poor  belting,  and  the 
lack  of  care  of  belts  is  now  generally  known,  yet  in  many 
shops  little  attention  is  given  to  this  important  subject. 

In  the  average  shop  the  assistant  who  is  assigned  "  belts  " 
as  a  duty  will  have  a  field  which  will  bring  quick  results. 
Fortunately  he  will  not  have  to  seek  far  to  obtain  definite 
information  and  instructions  regarding  the  care  of  belts.  In 
a  paper  on   belting  read  before  the   Society  of  Mechanical 


152  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

Engineers  by  Mr.  Fred  W.  Taylor,  and  in  a  paper  read  before 
the  same  society  by  Mr.  Carl  G.  Barth  on  ''  The  Transmis- 
sion of  Power  by  Leather  Belting,"  will  be  found  all  the  infor- 
mation required  for  a  complete  understanding  of  this  subject. 
There  is  also  manufactured  and  sold  at  a  reasonable  price  a 
tension  belt  bench,  together  with  the  necessary  outfit,  record 
cards,  etc.,  for  properly  caring  for  belting  and  keeping  a 
record  of  the  belts. 

Ordinarily  but  little  investigation  will  be  required  to  show 
that  the  condition  of  the  belts  is  poor;  a  casual  examination 
will  prove  this.  The  investigation,  however,  should  be  thor- 
ough and  an  accurate  record  made  of  conditions.  The  meth- 
ods followed  in  fitting  new  belts  and  caring  for  belts  should 
be  described,  the  records  of  belting  (if  any)  should  be  ex- 
plained, and  the  actual  condition  of  the  belts  should  be  fully 
described. 

A  full  investigation  of  every  subject  undertaken  trains  the 
assistant  to  be  thorough,  and  moreover  it  is  important  to 
know  and  record  conditions  before  changes  are  made  in  order 
that  the  value  of  the  changes  can  be  measured. 

Detailed  written  instructions  governing  the  care  of  belts 
and  the  records  to  be  kept  should  be  issued,  and  the  assistant 
who  investigated  the  subject  should  be  assigned  the  duty  of 
instructing  the  foremen,  belt  man  and  the  mechanics,  and  he 
should  see  that  the  instructions  are  enforced. 

After  the  system  is  in  good  running  order  in  the  machine 
shop  it  should  be  extended  to  the  other  shops.  The  belt  bench, 
belt  supplies,  etc.,  should  be  located  in  a  central  station  con- 
venient to  all  of  the  shops,  and  the  belt  man  and  necessary 
assistants  should  operate  from  this  station.  If  the  machine 
shop  is  not  too  far  removed  from  a  central  location  it  is  usually 
the  shop  in  which  the  belt  station  should  be  placed. 

The  illustration.  Fig.  14,  shows  a  central  belt-repair  sta- 
tion for  machine  shop,  smith  shop,  pipe  shop,  shipfitters'  shop, 
wood-working  shop,  electrical  shop  and  boiler  shop  at  the  Mare 
Island  Navy  Yard. 


THE    PRINCIPLES    OF    SCLENTIFIC    MANAGEMENT 


153 


CARE    OF    MACHINE    TOOLS    AND    TRANSMISSION    MACHINERY. 

In  a  **  day  work  "  shop  where  there  is  little  or  no  incentive 
for  the  men  to  turn  out  the  maximum  amount  of  work,  the 
condition  of  the  machine  tools  will  probably  be  poor.  Many 
men  will  let  their  machines  go  from  bad  to  worse,  with  a 
continually  decreasing  output,  without  reporting  the  fact,  until 


Fig.  14.    Central  Belt  Repair  Station  at  the  Mare  Island  Navy  Yard. 

a  complete  breakdown  and  stoppage  of  work  make  a  report 
obligatory. 

Much  improvement  can  be  accomplished  by  keeping  the 
machine  tools  and  appliances  in  good  condition,  and  this  is 
essential  when  scientific  management  is  finally  realized.  If 
standard  times  or  standard  rates  are  to  be  set  with  exactness, 
all  of  the  conditions  under  which  the  work  will  be  done  must 
be  known  and  these  conditions  must  be  realized  when  the 
work  is  performed.  One  of  these  important  factors  is  that 
the  machine  tools  and  appliances  must  be  in  excellent  condi- 
tion, and  these  conditions  must  be  standard  —  that  is,  must  be 


154  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

maintained.  In  the  great  majority  of  shops  the  condition  of 
the  machine  tools  is  far  from  excellent,  and  no  provision  is 
made  for  standardizing  conditions. 

A  full  investigation  should  be  made  of  the  condition  of  the 
machine  tools  and  transmission  machinery,  particularly  line 
shafting.  In  many  shops  it  v^ill  require  a  considerable  expen- 
diture of  money  to  put  the  equipment  in  efficient  condition. 
Usually  the  shafting  will  be  found  put  of  line,  bearings  in  bad 
shape,  and  many  of  the  machines  out  of  adjustment;  it  will 
also  frequently  be  found  that  the  attachments  arid  equipment 
for  the  machine  are  misplaced  or  in  poor  order.  These  con- 
ditions must  be  corrected,  even  if  it  costs  much  money.  The 
new  superintendent  knows  that  the  shop  expenses  will  rise 
materially  while  poor  conditions  are  being  made  good,  and 
he  should  have  j)ointed  this  out  to  the  management  before  he 
accepted  the  position  of  superintendent. 

After  these  defects  are  corrected,  arrangements  must  be 
made  to  keep  them  corrected.  This  can  only  be  done  by 
obtaining  the  right  man  and  making  him  responsible  for  the 
condition  of  the  machine  tools  and  educating  him  to  care  for 
them ;  we  thus  have  the  "  repair  man."  He  should  be  directly 
responsible  for  the  machines  and  transmission  machinery. 
It  is  his  duty  to  see  that  each  workman  keeps  his  machine 
clean,  free  from  rust,  and  that  standards  established  for  the 
care  and  maintenance  of  the  machines  and  their  accessories 
are  rigidly  maintained.  After  the  repair  man  is  selected,  he 
should  be  carefully  instructed  in  his  duties,  and  coached  for 
several  weeks.  All  gang  bosses  and  mechanics  must  report 
to  him  any  defects  in  tools  and  machinery,  or  anticipated 
trouble. 

CARE  OF  JIGS,  SPECIAL  TOOLS,  ETC. 

What  jigs,  special  tools,  etc.,  are  on  hand,  and  on  what 
jobs  can  they  be  used? 

Does  it  seem  possible  that  in  many  shops  this  question  can- 
not be  answered?  Yet  this  is  true;  in  many  shops  the  jigs 
and  special  tools  are  stored  in  various  places  or  are  left  where 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  1 55 

last  used  in  the  shop,  and  there  is  no  record  of  these  tools, 
or  of  their  uses.  In  some  cases  jigs  and  special  tools  on 
hand  are  not  used  on  a  job  where  they  can  be  used  to  advan- 
tage, because  the  foreman  did  not  know  of  the  existence 
of  these  tools,  or  had  forgotten  them. 

All  tools  of  this  kind  should  be  collected  and  those  which 
can  be  used  should  Le  put  in  good  condition  and  a  stowage 
provided  in  the  tool  room.  All  tools  should  be  marked,  and 
there  should  be  a  card  index  in  the  tool  room  and  another, 
giving  in  detail  the  uses  of  these  tools,  in  the  planning  depart- 
ment. Until  a  planning  department  is  obtained,  the  man  who 
routes  the  work  must  know  the  jigs  and  special  tools  that  are 
on  hand  and  their  uses. 

FUNCTIONAL   DUTIES. 

Nothing  has  been  said  in  the  improvements  so  far  outlined 
regarding  functional  duties.  The  shop  superintendent  will 
wisely  say  little  about  the  changes  he  is  making  or  intends  to 
make;  he  must  overcome  a  great  deal  of  prejudice  and  some 
direct  opposition.  He  must  go  about  his  work  quietly  and 
make  good  on  every  change  that  he  makes.  For  this  reason 
he  selects  in  the  beginning  the  propositions  which  afford  the 
largest  opportunities  and  where  the  changes  will  affect  but 
few  men;  he  at  first  takes  up  work  that  has  been  nobody's 
job  and  in  this  way  he  offends  no  one. 

He  has  said  nothing  about  functional  management,  yet 
quietly  and  without  parading  the  fact,  he  is  slowly  putting 
into  effect  functional  management.  He  has  a  belt  man  solely 
responsible  for  care  of  belts;  a  repair  man  charged  with  the 
care  of  machine  tools,  and  slowly  but  surely  the  various  duties 
in  the  shop  which  are  of  great  importance,  but  which  in  the 
past  have  been  no-man's  job,  are  investigated,  classified,  like 
duties  brought  together,  and  the  methods  standardized;  then 
the  right  men  for  these  duties  are  selected  and  carefully 
trained  and  are  finally  put  in  full  charge.  There  are  many 
of  these  small  duties  in  the  shops  which  are  considered  be- 
neath the  notice  of  the  foreman,  yet  it  will  pay  handsomely 


156  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

to  have  an  expert  study  and  standardize  these  duties  and  in- 
struct men  as  to  the  best  methods  to  be  followed  in  performing 
them. 

The  new  shop  superintendent  is  no  longer  new;  he  now 
knows  all  of  the  supervisory  force  well  —  he  knows  their 
strong  points  and  their  weaknesses;  he  has  already  decided 
which  of  these  will  oppose  his  improvements;  he  has  a  very 
good  idea  of  the  ones  that  he  can  bring  over  to  his  side  and 
the  ones  that  will  have  to  go.  When  he  is  sure  of  the  latter 
class,  the  quicker  he  lets  them  go  the  better,  for  he  should 
not  expend  energy  in  attempting  to  convince  a  man  who  will 
not  be  Convinced,  and  moreover  a  man  of  this  kind  has  influ- 
ence in  the  shop  and  it  is  well  to  remove  it  as  soon  as  possible. 
The  superintendent  has  also  learned  the  capabilities  of  many 
of  the  best  men  and  knows  their  attitude  towards  the  new 
administration  and  towards  the  changes  that  have  been  made. 
He  knows  where  there  are  possibilities  for  gang  bosses  and 
assistants. 

It  is  well  at  this  point  to  warn  the  new  superintendent 
against  bringing  in  from  outside  the  plant  too  many  assistants, 
gang  bosses,  etc.  It  is,  of  course,  very  desirable  that  the 
superintendent  should  have  assistants  who  have  worked  with 
him  and  know  his  aims  and  his  methods.  It  is  also  desirable 
in  nearly  all  cases  to  introduce  some  new  blood,  but  too  much 
new  blood  is  dangerous.  It  intensifies  the  opposition  of  fore- 
men, assistant  foremen  and  mechanics,  as  they  are  led  to  be- 
lieve that  the  superintendent  is  prejudiced  and  sees  nothing 
good  in  the  personnel  of  the  old  organization  and  that  event- 
ually all  of  the  bosses  will  be  replaced  by  outsiders ;  it  discour- 
ages ambitious  mechanics  who  expected  to  rise  with  the  new 
administration;  it  reflects  on  the  judgment  of  the  superin- 
tendents who  formerly  exercised  control  over  the  shop,  and 
these  superintendents  are  in  positions  of  responsibility,  where 
they  can  assist  or  oppose  the  efforts  of  the  shop  superintendent. 
The  shop  superintendent  will  do  well  to  confine  the  new  blood 
to  his  personal  assistants  and  fill  all  other  positions  from  the 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  1 57 

old  force,  unless  it  is  impossible  to  find  men  who  can  be 
trained  for  the  positions. 

The  superintendent  is  now  in  a  position  where  he  can  make 
changes  with  confidence;  he  has  secured  the  respect  and  con- 
fidence of  not  only  the  management,  but  also  of  many  of 
the  men;  the  time  is  ripe  for  the  open  application  of  func- 
tional management  as  applied  to  foremen  and  gang  bosses. 

Mr.  Taylor  in  his  paper  on  Shop  Management  describes  the 
new  type  of  management  as  follows: 

"  *  Functional  Management '  consists  in  so  dividing  the 
work  of  management  that  each  man,  from  the  assistant  super- 
intendent down,  shall  have  as  few  functions  as  possible  to 
perform.  If  practicable  the  work  of  each  man  in  the  man- 
agement should  be  confined  to  the  performance  of  a  single 
leading  function.  Under  the  ordinary  or  military  type  the 
workmen  are  divided  into  groups.  The  men  in  each  group 
receive  their  orders  from  one  man  only,  the  foreman  or  gang 
boss  of  that  group.  This  man  is  the  single  agent  through 
which  the  various  functions  of  the  management  are  brought 
into  contact  with  the  men.  Certainly  the  most  marked  out- 
ward characteristic  of  *  Functional  Management '  lies  in  the 
fact  that  each  workman,  instead  of  coming  in  direct  contact 
with  the  management  at  one  point  only,  namely,  through  his 
gang  boss,  receives  his  daily  orders  and  help  directly  from 
eight  different  bosses,  each  of  whom  performs  his  own  par- 
ticular function.  Four  of  these  bpsses  are  in  the  planning 
room  and  of  these,  three  send  their  orders  to  and  receive  their 
returns  from  the  men,  usually  in  writing.  Four  others  are 
in  the  shop  and  personally  help  the  men  in  their  work,  each 
boss  helping  in  his  own  particular  line  or  function  only.  Some 
of  these  bosses  come  in  contact  with  each  man  only  once  or 
twice  a  day  and  then  for  a  few  minutes  perhaps,  while  others 
are  with  the  men  all  the  time,  and  help  each  man  frequently. 
The  functions  of  one  or  two  of  these  bosses  require  them  to 
come  in  contact  with  each  workman  for  so  short  a  time  each 
day  that  they  can  perform  their  particular  duties  perhaps  for 


158  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

all  of  the  men  in  the  shop ;  and  in  their  line  they  manage  the 
entire  shop,  while  other  bosses  are  called  upon  to  help  their 
men  so  much  and  so  often  that  each  boss  can  perform  his 
function  for  but  a  few  men,  and  in  this  particular  line  a  num- 
ber of  bosses  are  required,  all  performing  the  same  function 
but  each  having  his  particular  group  of  men  to  help.  Thus 
the  grouping  of  the  men  in  the  shop  is  entirely  changed,  each 
workman  belonging  to  eight  different  groups,  according  to  the 
particular  functional  boss  whom  he  happens  to  be  working 
under  at  the  time." 

Again,  Mr.  Taylor,  in  "The  Art  of  Cutting  Metals,"  in 
the  following  words  applies  the  principles  of  functional  man- 
agement to  future  great  achievements :  ''  The  time  is  coming 
when  all  great  things  will  be  done  by  the  cooperation  of  many 
men,  in  which  each  man  performs  that  function  for  which  he 
is  best  suited,  each  man  preserves  his  own  individuality  and 
is  supreme  in  his  particular  function  and  each  man  at  the 
same  time  loses  none  of  his  originality  and  proper  personal 
initiative,  and  yet  is  controlled  by  and  must  work  harmoniously 
with  many  other  men." 

The  superintendent  should  understand  these  general  prin- 
ciples of  functional  management  and  should,  step  by  step,  put 
them  in  effect.  Before  any  step  is  made  in  this  direction, 
however,  the  superintendent's  most  experienced  assistant 
should  make  a  thorough  study  of  the  situation  and  the  super- 
intendent himself  should  devote  considerable  study  to  it. 

It  will  probably  appear  that  considerable  rearrangement 
of  machine  tools  is  necessary.  Unless  the  shop  superintendent 
has  had  much  experience  in  functional  management  he  should 
not  undertake  any  radical  rearrangement  of  machines  and 
equipment.  Now  is  the  time  that  the  expert  organizer  should 
be  brought  in  to  carry  out  the  complete  reorganization.  If 
this  cannot  be  accomplished,  the  services  of  such  an  expert 
should  be  obtained  for  consultation  regarding  this  particular 
feature  of  the  general  improvement. 

The  size  and  location  of  the  planning  department  should 
also  be  settled  at  this  time,  and  the  advice  of  an  expert  is  of 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I59 

value  on  this  subject.  Before  real  scientific  management  is 
obtained,  and  when  the  organization  is  in  the  stage  which 
we  may  call  "  near  "  scientific  management,  there  will  be  a 
planning  department  which  will  control  the  work  of  the  shop, 
but  not  in  the  detail  and  not  in  the  satisfactory  manner  that 
Mr.  Taylor's  planning  department  with  its  scientific  rate-fixing 
department  controls  the  work;.  ,  But  while  providing  a  '*  near  " 
planning  department,  the  ideal  should  be  kept  in  view,  and 
provision  should  be  made  for  the  necessary  expansion. 

Following  Mr.  Taylor's  typical  organization  a  shop  superin- 
tendent can  assign  the  work  so  that  each  man  has  as  few 
functions  as  possible  to  perform.  In  every  shop  this  change 
in  itself,  without  any  other,  will  be  of  material  benefit.  Great 
improvement  can  be  made  in  this  direction  by  managers  and 
superintendents  without  the  assistance  of  an  expert  organizer. 
The  assignment  of  duties  which  Mr.  Taylor  found  satisfactory 
at  Midvale  and  Bethlehem  will  be  applicable  to  any  machine 
shop,  and  with  slight  modifications  are  applicable  to  any  shop. 
In  addition  to  the  repair  man  and  the  belt  man,  the  duties  of 
which  have  already  been  described,  there  should  be  three  types 
of  functional  bosses  in  each  shop,  viz. :  the  gang  boss,  the 
speed  boss,  and  the  inspector,  and  the  number  of  these  will 
depend  on  the  size  of  the  shop  and  the  general  character  of 
the  work.     The  duties  of  these  are  given  in  Chapter  XII. 

PLANNING   DEPARTMENT. 

The  next  step  to  be  considered  is  to  put  in  operation  a 
planning  department.  This  department  will  be  far  short  of 
the  ideal,  but  nevertheless  it  will  be  an  improvement.  Any 
manager  or  engineer  who  has  given  any  consideration  to 
scientific  methods  in  shop  management  must  be  impressed 
with  the  necessity  in  the  great  majority  of  shops  of  improved 
methods  for  planning  the  work.  In  many  shops  there  is  no 
planning  worthy  of  the  name. 

While  it  is  impossible  for  a  manager  or  shop  superintendent 
to  develop  a  planning  department  which  will  plan  the  work 
in  all  its  details,  it  is  possible  for  a  manager  or  shop  superin- 


l6o  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

tendent  to  develop  a  department  which  will  plan  the  main 
operations  and  route  the  work.  Such  a  planning  department 
will  analyze  the  work  when  orders  are  received  and  will  see 
that  sufficient  information  is  on  hand  to  proceed  with  the 
work;  it  will  make  a  complete  list  of  the  material  required, 
and  will  notify  the  storekeeper  to  reserve  the  material  on  hand 
for  the  job,  and  will  notify  the  purchasing  department  of  the 
material  to  be  purchased  and  when  required ;  it  will  order  the 
patterns  of  the  pattern  shop,  the  castings  of  the  foundry,  and 
the  forgings  of  the  smith  shop;  it  will  decide  if  it  is  advan- 
tageous to  make  jigs  or  special  tools  and  if  so  will  order  them ; 
it  will  decide  in  general  how  the  work  shall  be  done  and  will 
route  the  work  to  the  machines  and  prepare  written  instruc- 
tion cards  describing  what  is  to  be  accomplished.  All  of  these 
duties  will  be  performed  not  as  required,  but  when  the  order 
is  received,  and  the  job  is  analyzed. 

When  the  material,  castings,  forgings,  etc.,  for  a  job  are 
received  in  the  shop  the  planning  department  will  issue  the 
instruction  cards  and  will  see  that  the  work  is  undertaken 
at  the  proper  time  and  is  carried  through  the  shop  in  proper 
order.  The  planning  department  will  establish  standard  meth- 
ods for  work,  and  will  see  that  all  established  standards  are 
adhered  to.  It  will  be  the  source  of  information  for  the  shop, 
and  it  will  receive  and  act  on  all  reports  from  gang  bosses, 
speed  bosses,  layout  men,  inspectors,  repair  man,  etc.  It  will 
leave  the  foreman  free  from  details,  in  order  that  he  may  give 
his  attention  to  the  big  things,  and  to  the  unusual.  The  fore- 
man thus  becomes  in  a  way  the  "  Exception  man." 

This  kind  of  a  planning  department  can  and  will  render 
valuable  service  in  the  average  shop,  and  it  can  readily  be 
expanded  into  the  scientific  planning  department.  With  a 
planning  department  of  this  kind  the  premium  system  for  the 
payment  of  labor  can  be  used  to  excellent  advantage. 

A  planning  department  can  be  developed  by  the  manager 
or  the  shop  superintendent,  but  it  is  no  easy  task ;  it  will  require 
work  and  study,  but  the  results  will  pay  well  for  the  time 
and  energy  expended.     In  Chapter  XII  there  is  given  a  de- 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  l6l 

scription  of  a  shop-planning  department  developed  by  a  man- 
ager, which  proved  of  great  value. 

TIME  STUDIES. 

The  study  of  unit  times,  before  the  best  methods  have  been 
determined  and  the  work  standardized,  has  been  declared  by 
some  to  be  worse  than  a  waste  of  time.  This  is  true  if  this 
study  is  for  the  purpose  of  fixing  rates  or  standard  times,  but 
if  stop-watch  time  studies  are  made  for  the  purpose  of  im- 
provement in  methods,  the  statement  is  not  correct.  Time 
studies  can  be  made  of  great  use  in  exposing  defects  in  meth- 
ods, organization  and  equipment,  and  in  indicating  the  remedy. 

In  the  shops  under  consideration,  when  the  planning  depart- 
ment has  been  established,  the  time  study  work  under  a  com- 
petent assistant  should  be  undertaken.  Full  records  should  be 
made  of  the  observed  times  and  surrounding  conditions,  to- 
gether with  a  statement  of  the  defects  discovered,  and  the 
recommendations  for  improvement;  one  copy  of  this  report 
should  go  to  the  planning  department  and  another  to  the  shop 
superintendent.  A  time-study  man  should  be  kept  continu- 
ously on  this  work;  he  will  be  invaluable  to  the  planning  de- 
partment in  improving  methods  and  equipment. 

IMPROVEMENT  OF  PLANT  EQUIPMENT. 

The  maintenance  of  plant  equipment  is  a  profitable  field 
for  investigation.  It  is  of  course  easy  to  recommend  the 
purchase  of  thousands  of  dollars'  worth  of  new  equipment ; 
it  requires  but  little  consideration  to  show  that  better  results 
can  be  obtained  with  better  equipment,  and  this  is  the  usual 
result  of  an  investigation  of  this  subject.  It  requires,  how- 
ever, a  more  thorough  investigation  and  more  ability  and 
knowledge  to  obtain  better  results  by  a  better  utilization  of 
the  existing  equipment,  and  in  nearly  all  cases  this  result  can 
be  accomplished.  The  assistant  assigned  to  the  investigation 
of  the  plant  equipment  should  work  under  the  direction  of 
the  planning  department,  and  in  cooperation  with  the  time- 
study  man;  the  observations  of  the  latter  should  give  him 


l62  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

many  leads  which,  when  followed  up,  will  bring  about  a  better 
utilization  of  the  equipment. 

As  the  shops  of  the  plant  under  consideration  are  for  illus- 
tration assumed  to  be  located  in  a  shipyard,  it  may  be  noted 
that  a  very  profitable  field  for  investigation  is  the  pneumatic 
plant  and  the  use  of  pneumatic  tools.  In  a  large  shipyard  the 
pneumatic  system  is  extensive,  and  losses  incurred  and  which 
may  be  avoided  are  ordinarily  large.  These  are  wastes  due 
to  carelessness,  such  as  leaving  valves  open;  and  wastes  due 
to  defects  in  the  system,  such  as  leaks  in  piping,  leaks  in  hose, 
etc.,  or  improper  use  of  high  pressure  air.  There  is  also 
considerable  avoidable  loss  due  to  abuse  of  pneumatic  tools. 
An  investigation  of  these  conditions,  together  with  remedial 
measures,  will  usually  result  in  large  savings. 

It  will  frequently  be  found  that  the  purchase  of  a  small 
amount  of  additional  equipment,  or  changes  in  equipment 
which  will  require  but  a  moderate  outlay,  will  result  in  con- 
siderable increase  in  output.  In  these  cases  the  investigator 
should  be  prepared  to  show  by  conservative  figures  that  the 
saving  is  real  and  not  imaginary.  In  some  cases  tools  are 
purchased  which  do  not  pay  interest  on  the  investment,  and 
too  much  equipment  is  an  error  which  is  sometimes  made. 

In  many  machine  shops,  dependence  is  placed  on  the  over- 
head traveling  crane  for  handling  all  material  to  the  machine 
tools.  In  the  majority  of  shops  where  this  is  the  case,  an 
investigation  will  usually  show  that  there  are  many  delays 
due  to  waits  for  the  crane,  and  that  many  jobs  are  inefficiently 
man-handled.  The  installation  of  a  number  of  light  jibs  on 
which  pneumatic  hoists  are  mounted,  for  serving  the  larger 
machine  tools,  will  result  in  an  elimination  of  waits,  and  is 
an  investment  which  will  pay  dividends.  The  illustration, 
Fig.  15,  shows  a  small  machine  shop  supplied  with  inexpensive 
jib  cranes  for  serving  the  larger  machine  tools. 

There  are  often  gross  defects  in  equipment  which  may  be 
overlooked  for  years  or  until  a  detail  investigation,  with  stop- 
watch time  study,  reveals  them.  In  a  large  boatshop,  which 
did  a  large  business,  and  has  a  splendid  equipment  of  overhead 


THE    PRINCIPLES    OF    SCtENTIFIC    MANAGEMENT 


163 


cranes,  machine  tools,  and  other  faciHties,  a  detailed  investi- 
gation brought  out  the  fact  that  the  cutting  of  timbers,  plank- 
ing, etc.,  to  length  was  done  by  hand  by  highly-paid  mechanics, 
and  that  the  shop  was  not  equipped  with  a  power  cut-off  saw. 
The  plant  equipment  is  a  most  interesting  subject  for  inves- 
tigation, and  is  a  very  profitable  field.  Many  will  no  doubt 
admit  that  at  first  this  is  a  good  field  for  improvement,  but 


Fig.  15.    Small  Machine  Shop,  Mare  Island  Navy  Yard.    Note  the 
small  jib  cranes  which  serve  the  machine  tools. 


it  may  seem  that  in  a  comparatively  short  time  there  will  be 
little  to  do.  At  first  thought  this  seems  reasonable,  but  in 
practice  it  is  not  found  to  be  the  case,  for  there  is  always 
a  field  with  plenty  of  work  for  the  plant  man.  Methods  of 
manufacture  cliange  rapidly  and  many  improvements  are  made 
in  plant  equipment.  For  these  reasons  in  a  plant  of  any  size 
it  will  be  of  advantage  to  have  at  all  times  in  the  planning 
department  an  expert  for  the  maintenance  of  plant. 


164  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


STANDARDIZATION    IN    ALL    THINGS. 

In  the  manner  already  indicated,  everything  in  the  shop, 
large  and  small,  should  be  standardized.  There  must  be  a 
Standard  way  for  caring  for  machinery  and  appliances ;  stand- 
ard tools,  and  standard  methods  for  issuing  them ;  and  in  fact 
a  standard  method  for  every  operation  in  the  shops. 

Before  any  standards  are  adopted,  there  must  be  intelligent 
study  and  investigation,  and  the  standard  shall  be  the  best 
method  known  to  the  men  in  the  establishment  who  are  best 
qualified  to  pass  on  the  subject. 

Every  standard  which  is  adopted  must  be  described  in  detail 
in  writing  with  necessary  sketches  or  drawings  to  enable  it 
to  be  fully  understood.  As  soon  as  a  standard  is  decided  on, 
it  must  be  put  in  immediate  operation,  and  must  be  rigidly 
enforced;  there  must  be  no  back-sliding,  or  going  back  to 
go-as-you-please  methods. 

There  is  little  doubt  that  the  methods  adopted  as  standard 
can  be  improved  later,  and  the  standards  should  be  improved. 
Many  seem  to  believe  that  standardization  is  a  foe  to  prog- 
ress, and  that  the  adoption  of  standards  precludes  im- 
provement. This  is  far  from  the  truth.  Standardization 
represents  the  determination  by  the  best  talent  available, 
the  best  tool,  the  best  method  or  the  best  appliance  for  pro- 
ducing work,  and  the  adherence  to  this  method  until  a  better  is 
determined. 

Mr.  Gantt  says,  regarding  standardization,  "  All  work,  and 
all  knowledge,  for  that  matter,  may  be  divided  into  two  classes, 
Expert  and  Standard.  Expert  knowledge  may  be  described 
as  that  which  has  not  been  reduced  to  writing  in  such  a  man- 
ner as  to  be  generally  available,  or  exists  only  in  the  minds 
of  a  few.  By  analogy,  expert  work  is  work,  the  methods  of 
doing  which  either  are  known  only  to  a  few  or  have  not  been 
so  clearly  described  as  to  enable  a  man  familiar  with  that 
class  of  work  to  understand  them. 

"  On  the  other  hand,  standard  methods  are  those  that  are 
generally  used,  or  have  been  so  clearly  described  and  proved 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  I05 

that  a  man  familiar  with  that  class  of  work  can  understand 
them  and  safely  employ  them. 

''  The  largest  problem  of  our  expert  is  to  standardize  expert 
methods  and  knowledge." 

The  standard  represents  the  best  method  known  at  the  time 
it  is  adopted,  but  when  experience  or  further  investigation 
points  out  a  better  method  it  should  become  the  standard. 
But,  the  standards  must  be  protected;  changes  must  not  be 
based  on  whims,  or  because  of  the  natural  tendency  of  man 
to  change  a  method  devised  by  someone  else.  No  change 
should  be  made  in  a  standard  except  upon  the  written  authority 
of  the  planning  department,  and  this  department  must  author- 
ize no  changes  until  the  new  methods  have  been  fully  inves- 
tigated and  it  is  clearly  shown  that  the  change  is  a  real  im- 
provement. 

FUNCTIONAL   MANAGEMENT   OUTSIDE   OF    SHOPS. 

Considerable  space  has  been  devoted  to  improvements  that 
can  be  made  in  the  shops  under  the  supervision  of  a  competent 
and  energetic  shop  superintendent.  It  must  not  be  assumed 
that  the  shops  are  the  only  places  where  improvements  can  be 
made. 

The  manager  should  require  each  head  of  division  or  depart- 
ment to  study  and  to  investigate  his  department  as  has  been 
outlined  for  the  shop  superintendent;  if  this  is  done,  results 
equally  as  satisfactory  as  those  obtained  in  the  shops  will  be 
secured. 

In  the  main  office  and  the  drafting  rooms  material  improve- 
ment can  no  doubt  be  made ;  in  cost-keeping  methods  and 
storehouse  arrangements  there  is  usually  a  wide  field  for 
improvement.  In  these  places,  as  in  the  shops,  the  changes 
most  prolific  in  results  will  be  those  in  the  direction  of  func- 
tional management  and  standardization.  The  duties  of 
officers,  draftsmen  and  clerks  should  be  made  functional,  and 
the  duties  and  methods  should  then  be  standardized;  after  this 
has  been  accomplished  it  is  possible  to  lay  out  each  day  a 
definite  task  for  each  man. 


l66  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

Much  can  be  clone  by  heads  of  divisions  to  improve  their 
departments  if  first  their  interest  and  then  their  enthusiasm 
for  scientific  methods  can  be  aroused.  When  enthusiasm  is 
aroused,  study  and  investigation  v^ill  follow,  and  the  way  for 
improvement  will  be  clearly  indicated. 

One  of  the  most  important  duties  of  the  manager  is  to  arouse 
interest  and  enthusiasm  in  the  heads  of  division  for  the  work 
and  for  better  methods  of  doing  the  work.  The  ability  to 
do  this  is  one  of  the  most  valuable  assets  of  a  manager.  The 
surest  way  to  accomplish  this  result  is  to  provide  the  incentive 
—  to  make  it  worth  while  for  the  head  of  division  to  show 
interest  and  enthusiasm  in  the  best  way  to  accomplish  the 
work  of  his  division.  If  a  manager  himself  has  real  enthu- 
siasm, and  shows  his  heads  of  division  that  he  is  not  only 
interested  in  progress,  but  that  he  is  determined  to  secure  it, 
and  that  he  will  reward  those  who  assist  him,  he  will  soon 
get  from  the  heads  of  division  interest,  and  finally  enthusiasm. 
Each  of  these  will  give  much  time  to  study  and  to  investiga- 
tion of  better  methods  for  his  department,  and  if  led  by  the 
manager  towards  functional  management  and  standardization 
great  improvements  will  be  made. 

In  the  advance  that  has  been  made  in  tlie  shops  towards 
scientific  management,  t-he  office  must  do  its  part.  There 
must  be  an  accurate  cost-keeping  system  which  meets  the 
requirements  of  the  shop;  which  not  only  gives  true  cost,  but 
gives  it  in  such  a  manner  that  defects  in  organization  or  defects 
in  methods  will  be  indicated.  All  forms  and  office  methods 
should  be  standardized.  The  drawing  office  methods  should 
be  materially  changed.  The  shop  is  more  dependent  on  the 
drawing  office  than  on  any  other  department,  and  in  many 
establishments  changes  can  be  made  in  drawing  office  methods 
which  will  materially  reduce  the  cost  of  work  in  the  shops. 

In  many  establishments  the  employment  of  an  expert  to 
systematize  the  drawing  office,  is  one  of  the  best  moves  that 
can  be  made  by  the  management  —  even  though  the  expert 
takes  a  year  to  do  the  work  and  is  paid  a  large  fee.  The 
drawing  offices  of  American  shipyards  and  Government  navy 


THE    PRINCIPLES    OF    SCIENTIFIC    MANAGEMENT  167 

yards  are,  generally  speaking,  even  more  badly  managed  than 
the  average  jobbing  machine  shop,  and  an  expert  to  systema- 
tize the  methods  in  these  offices  will  in  a  very  short  time  pay 
his  salary  or  fee  many  times  over. 

Let  the  chief  draftsman  in  each  office  do  a  little  investi- 
gating, and  ask  himself  a  few  questions: 

"  Are  the  duties  in  the  office  clearly  defined,  and 
assigned  in  accordance  with  the  principles  of  func- 
tional management  ?  " 

"  Are  the  plans  issued  to  the  shops  of  standard 
sizes,  and  is  a  standard  arrangement  used?" 

"  Do  the  plans  clearly  indicate  the  important 
dimensions  which  must  be  adhered  to?  Do  they 
show  the  tolerances  allowed?  Do  they  show  the 
finish  required  for  every  surface?" 

There  is  a  great  deal  of  work  done  in  machine  shops,  as 
well  as  other  shops,  particularly  in  shipyards,  where  it  makes 
no  difference  if  a  dimension  varies  1/16"  or  ^",  or  even 
]^^^  from  that  shown  on  the  drawing;  there  are  on  the  same 
drawing  other  dimensions  which  should  be  exact  within  a 
hundredth  of  an  inch,  or  even  closer  limits.  For  dimensions 
where  extreme  accuracy  is  required,  the  foremen  or  assistant 
foremen  know  the  use  to  which  the  part  is  put  and  will  usually 
direct  the  machinist,  but  for  the  general  run  of  dimensions 
the  machinist  will  make  them  as  exact  as  possible,  using  a 
metal  scale  and  pair  of  calipers,  while  many  dimensions  will 
be  satisfactory  if  within  an  eighth  or  quarter  inch  of  that 
shown  on  the  drawing.  This  results  in  many  unnecessary 
cuts,  loss  of  time  in  making  measurements,  and  unnecessarily 
adds  to  the  cost  of  the  work.  All  important  dimensions  which 
must  be  adhered  to  should  be  prominently  marked,  and  toler- 
ances given  for  all  dimensions. 

If  the  drawing  office  work  be  studied  and  analyzed  as  has 
been  done  for  the  work  in  the  shops,  there  is  little  doubt 
that  as  much  improvement  can  be  made  here  as  has  been  made 
in  the  shops. 


l68  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

STORE   SYSTEM. 

In  many  plants  the  store  system  is  far  from  satisfactory. 
From  the  shop  point  of  view  there  are  three  important  require- 
ments in  connection  with  the  store  system: 

(1)  That  ordinary  supphes  which  are  regularly  required 
shall  always  be  in  stock. 

(2)  That  stores  required  may  be  obtained  quickly. 

(3)  That  the  planning  department  shall  know  each  day  the 
stores  on  hand;  and  that  this  department  in  planning 
work  shall  be  able  to  set  aside  stores  for  the  job 
planned  and  have  them  reserved  for  the  job. 

From  the  storekeeper's  point  of  view  there  should  be  ample 
notice  of  the  probable  requirements  in  order  that  the  stock 
may  be  maintained.  With  a  planning  department  which  plans 
every  job  as  soon  as  the  order  is  received  and  makes  complete 
orders  of  material,  there  should  be  no  difficulty  in  keeping 
the  store  informed  of  the  probable  requirements. 

From  the  storekeeper's  point  of  view  there  is  little  need  of 
the  shop  having  a  daily  balance  of  stores,  but  if  the  planning 
is  to  be  done  properly  and  the  work  carried  out  as  planned 
this  must  be  supplied.  This  is  also  of  assistance  in  keeping 
a  proper  stock  of  material.  The  planning  department  can 
materially  aid  the  storekeeper  in  this,  but  to  do  so  it  must 
know  what  is  on  hand. 

There  are  very  few  store  departments  which  meet  the  essen- 
tial requirements  of  the  shops,  and  this  subject  should  receive 
more  consideration.  In  a  large  establishment  with  work  and 
shops  covering  considerable  area  there  is  generally  one  central 
store;  there  should  be  in  addition  a  number  of  sub-stores 
located  in  the  shops,  in  order  that  material  which  is  in  con- 
stant use  may  be  quickly  obtained. 

It  will  be  profitable  to  outline  the  conditions  that  should 
be  met  and  the  service  that  should  be  rendered  by  the  store 
department ;  then  show  in  detail  wherein  the  store  department 
fails  and  why.  An  investigation  of  this  kind  will  clearly 
indicate  defects  and  usually  point  out  the  remedy. 


CHAPTER    XII 
Methods  Which  Lead  Toward  Scientific  Management 

An  officer  in  charge  of  government  shops  who  wishes  to 
manage  them  in  the  same  manner  as  he  would  were  he  in 
commercial  life,  where  the  payment  or  non-payment  of  divi- 
dends will  measure  his  success  or  failure  as  a  manager,  has 
some  difficulties  to  overcome  which  are  not  met  elsewhere. 
In  the  government  service  the  reward  for  meeting  and  over- 
coming these  difficulties  is  so  meager  that  few  are  tempted 
to  wage  the  necessary  fight,  as  such  a  fight  is  replete  with 
many  dangers,  and  if  successful,  the  reward  is  little  more 
than  the  self-satisfaction  of  the  knowledge  of  "  duty  well 
done."  This  is  one  of  the  important  reasons  why  the  results 
obtained  in  many  government  shops  are  not  equal  to  those 
obtained  in  well-managed  commercial  establishments.  In 
efforts  to  obtain  efficiency  in  government  establishments  with 
which  I  have  been  connected  I  have  encountered  my  share  of 
the  difficulties.  This,  however,  is  no  place  for  a  description 
of  these  difficulties,  and  it  will  suffice  to  say  that  in  spite 
of  tremendous  obstacles  the  application  of  the  general  prin- 
ciples of  scientific  management  to  government  work  has 
wrought  improvements  and  brought  results  which  are  far 
beyond  expectations.  The  results  obtained,  some  of  which 
will  be  described  in  subsequent  chapters,  justify  the  belief 
that  any  manager  of  a  commercial  establishment  can  himself 
apply,  without  the  aid  of  an  expert  organizer,  the  general 
principles  of  scientific  management,  and  he  should  obtain 
even  greater  improvement  than  the  application  of  these  prin- 
ciples brought  about  in  a  government  establishment. 

There  will  be  for  many  years,  whatever  may  be  the  cause, 
establishments  where  the  detail  methods  advocated  for  carry- 
ing out  the  principles  of  scientific  management  will  not  be 

169 


170  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

applied.  Methods  which  have  been  used  in  following  the 
general  principles,  without  the  use  of  a  scientific  rate  depart- 
ment, should  be  of  assistance  to  managers  who  wish  to  make 
improvements  in  these  directions  without  outside  assistance. 
Each  of  these  managers,  when  he  begins  to  apply  the  general 
principles,  will  see  the  benefits  to  be  derived  from  the  more 
scientific  details,  and  will  realize  the  need  of  an  expert  organ- 
izer to  assist  him,  and  he  may  become  impatient  with  half-way 
measures.  This  is  a  good  sign;  contentment  never  brings 
progress,  and  discontent  is  frequently  the  forerunner  of  im- 
provement; every  manager  should  do  the  best  possible  under 
the  existing  conditions,  and  an.  energetic  capable  manager  can 
go  alone  for  a  considerable  distance  on  the  road  to  scientific 
methods. 

APPLICATION     OF    THE     GENERAL     PRINCIPLES     OF     SCIENTIFIC 

MANAGEMENT  TO  NAVY  YARD  SHOPS. 

The  machine  shop  at  the  Mare  Island  Navy  Yard  was  no 
worse  than  the  average  Navy  Yard  shop ;  it  was,  of  course, 
below  the  standard  of  the  average  commercial  jobbing  machine 
shop,  yet  the  faults  found  can  be  found  in  a  very  large  number 
of  shops.  While  government  shops  leave  much  to  be  desired, 
it  must  be  admitted  that  the  government  has  no  monopoly 
of  the  inefficient  establishments.  The  steps  taken  to  correct 
many  of  the  defects  are  given  in  some  detail  in  the  descrip- 
tion which  follows. 

DETAILS   OF   SHOP   SYSTEM. 

In  describing  the  shop  system,  little  or  no  claim  is  made 
for  originality.  The  system  is  based  on  the  teachings  of 
Mr.  Fred  W.  Taylor,  in  so  far  as  Mr.  Taylor's  system  can 
be  applied  to  a  day-work  shop,  without  a  rate-making  depart- 
ment. 

No  attempt  is  made  to  give  the  workmen  detailed  instruc- 
tion cards  describing  how  each  operation  is  to  be  performed ; 
the  instruction  cards  only  tell  the  workman  definitely  zvhat  is 
to  be  accomplished,  and  he,  assisted  by  the  gang  boss  and 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT  I7I 

Speed  boss,  determines  the  detail  methods.  It  will  thus  at 
once  be  seen  that  important  elements  of  Mr.  Taylor's  system 
are  not  undertaken,  but  it  is  believed  that  it  is  impossible  for 
a  manager  to  attempt,  himself,  to  introduce  these  elements. 

The  use  of  the  day-work  system  was  the  result  of  circum- 
stances over  which  the  manager  had  no  control.  It  was  the 
constant  aim  to  get  the  shops  up  to  maximum  efficiency  under 
this  system  and  at  the  same  time  collect  data  which  will  make 
it  easy  to  go  to  one  of  the  more  efficient  systems  of  paying 
labor.  If  an  expert  organizer  is  not  to  be  employed  the 
Halsey  premium  system  is  undoubtedly  the  best  to  use;  when 
a  shop  has  been  raised  to  a  high  standard  under  the  day-work 
system,  it  is  an  easy  step  to  go  to  the  premium  system. 

There  are  a  number  of  general  instructions  which  apply 
to  all  shops  under  the  one  management,  and  as  these  have  to 
do  with  the  management  of  the  machine  shop,  the  most  im- 
portant of  these  instructions  will  be  given  before  the  machine 
shop  instructions  are  taken  up. 

DELIVERY   OF   PAPERS   BETWEEN    SHOPS   AND   OFFICES. 

In  many  establishments  papers  are  sent  from  office  to  office 
by  messengers  from  each  office  or  shop.  This  method  is 
expensive  and  unsatisfactory.  The  ideal  method  so  far  as 
operation  is  concerned  is  the  use  of  pneumatic  tubes  connect- 
ing all  departments,  but  where  the  shops  and  offices  are  scat- 
tered, the  installation  of  pneumatic  tubes  will  involve  a  large 
expenditure  of  money  which  is  not  warranted  by  the  results 
obtained.  The  following  simple  arrangement  has  been  found 
satisfactory: 

In  the  main  office  there  is  a  set  of  post-office  pigeon-holes ; 
one  for  each  foreman  or  shop;  one  for  each  officer  attached 
to  the  department,  and  one  for  each  sub-department  in  the 
main  office,  such  as  drafting  room,  estimating  department, 
requisition  office,,  etc.  In  each  of  these  offices  there  are  two 
mail  baskets,  one  "  out-going,"  the  other  "  receiving."  A  boy 
distributes  all  papers  from  the  main  office  to  the  foremen's 
offices  and  all  papers  between  the  foremen's  offices.     He  starts 


\y2  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

his  first  trip  at  eight  o'clock  in  the  morning,  taking  all  papers 
from  the  pigeon-holes  and  putting  each  shop's  papers  in  a 
separate  envelope.  These  papers  are  distributed  to  the  various 
shops,  being  placed  in  the  receiving  basket.  All  "  out-going  " 
papers  are  collected  and  returned  to  the  main  office,  where 
they  are  distributed  for  the  next  trip,  v^hich  begins  at  nine. 
This  is  continued  throughout  the  day ;  a  round  trip  being  made 
every  hour.  The  papers  for  the  various  officers  and  sub- 
departments  in  the  main  office  are  distributed  from  the  "  post 
office  "  by  the  office  messenger. 

Soon  after  this  system  was  put  in  operation  it  was  found 
that  the  boy  was  irregular  in  the  collections.  This  was  cor- 
rected by  having  him  carry  a  small  watchman's  clock  having 
a  key  at  each  point  of  collection.  The  dials  from  the  clocks 
are  examined  each  day  by  the  chief  clerk. 

RECORDS    OF    WORKMEN. 

In  each  shop  a  record  is  kept  of  the  mistakes,  neglect  and 
other  offenses  of  the  workmen.  A  man  through  carelessness 
makes  an  error  in  machining  a  piece  of  work  which  involves 
only  a  small  loss;  it  is  out  of  the  question  to  suspend  or 
discharge  him  for  this,  for  it  may  be  the  only  mistake  he  has 
made  in  six  months.  Moreover,  severe  penalties  for  errors 
of  this  kind  will  make  workmen  over-careful ;  they  will  take 
an  unnecessarily  long  time  on  their  work  and  run  up  the 
cost.  On  the  other  hand,  the  man  who  habitually  makes  mis- 
takes should  be  known,  and  the  written  record  brings  this 
out. 

The  knowledge  among  the  men  that  these  records  are  kept 
has  a  good  effect,  and  when  a  reduction  of  the  force  is  neces- 
sary the  records  are  of  great  assistance  in  selecting  the  men 
to  be  laid  off.  In  a  government  establishment  there  can  be 
but  three  punishments :  reduction  in  pay,  suspension,  and  dis- 
charge. These  are  much  too  severe  for  many  offenses  which 
merit  some  punishment. 

Fines  are  perhaps  the  best  punishments  for  all  offenses 
which  do  not  merit  discharge.     The  amount  of  the  fine  should 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT  1 73 

be  in  accordance  with  the  offense  and  may  range  from  one 
cent  to  twenty-five  dollars.  All  fines  collected  should  be  re- 
turned to  the  workmen  in  some  way  and  should  never  be 
taken  by  the  company.  An  excellent  way  to  dispose  of  fines 
is  to  give  the  money  collected  to  the  workmen's  benevolent  in- 
surance fund,  if  there  is  one;  if  not,  they  should  be  used  in 
some  way  to  benefit  the  workmen  as  a  whole. 

SHOP    ORDERS. 

The  type  of  shop  orders,  both  for  output  work  and  expense 
account  work,  are  shown  in  Fig.  2  and  Fig.  3  (Chapter  V), 
and  require  but  little  explanation.  It  requires,  however,  some 
educational  work  to  have  the  orders  properly  issued.  Some 
trouble  was  experienced  in  getting  the  foreman  issuing  the 
order  to  fill  in  the  date  on  which  the  work  is  actually  wanted. 

It  requires  no  investigation  or  thought  to  fill  in  "  as  soon 
as  possible  "  or  "  immediately,"  and  a  great  many  orders  were 
in  the  beginning  made  out  in  this  way.  The  greatest  diffi- 
culty, however,  was  experienced  in  getting  the  foreman  re- 
ceiving the  order  to  make  an  intelligent  promise.  When  first 
used  it  was  found  that  promised  dates  of  completion  were, 
in  some  cases,  made  without  the  foreman  knowing  the  work 
to  be  accomplished,  and  in  nearly  all  cases  were  made  with 
but  little  consideration  of  the  job  itself,  or  of  other  work  in 
the  shop. 

With  a  little  education  and  constant  watchfulness,  this  was 
corrected.  At  present  care  is  taken  that  the  date  given  on 
which  the  work  should  be  completed  is  reasonable,  and  is  the 
time  that  the  work  should  be  delivered,  and  the  promised 
date  of  completion  is  only  given  after  the  work  is  carefully 
sized  up.  If  the  date  is  beyond  the  date  on  which  the  work 
is  required,  the  foreman  requiring  the  work  is  immediately 
telephoned,  and,  if  the  question  is  not  satisfactorily  arranged, 
it  is  immediately  referred  to  the  shop  superintendent. 

A  tickler  file  is  kept  in  each  shop  of  promises  made  and 
promises  due,  and  failures  to  keep  promises  are  reported  to 
the  shop  superintendent. 


174  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


MATERIAL    SUPPLY. 

There  are  two  sources  of  supply  of  material,  the  general 
storehouse,  which  may  be  some  distance  from  some  of  the 
shops,  and  the  sub-stores,  which  are  located  in  the  shops.  In 
the  sub-stores  there  is  kept  a  small  supply  of  materials  which 
are  constantly  required  in  the  shops.  The  sub-stores  are  re- 
plenished as  necessary  from  the  main  store.  There  must 
be  a  strict  accountability  for  all  stores  and  the  methods  fol- 
lowed to  secure  this  end  are  described  in  the  chapters  devoted 
to  Cost  Keeping. 

Material  from  the  shop  stores  can  be  quickly  obtained,  but 
time  is  required  to  obtain  material  from  the  general  store- 
house. The  practice  usually  followed  is  to  send  messengers 
from  each  shop  to  the  main  storehouse  for  material  when  re- 
quired, and  these  messengers  often  wait  for  the  material  and 
carry  it  to  the  shop,  using  a  hand  cart,  or  a  team.  This  sys- 
tem is  extremely  unsatisfactory. 

There  should  be  enough  looking  ahead  to  enable  material 
to  be  obtained  from  the  main  storehouse  in  an  orderly  man- 
ner and  at  reasonable  cost.  Requisitions  are  made  on  the 
store  in  triplicate,  one  copy  is  retained  by  the  shop  (or  check- 
ing the  stores  on  arrival,  and  two  sent  to  the  storehouse  by 
means  of  the  messenger  service.  The  stores  are  collected  and 
deliveries  are  made  to  the  shops  by  means  of  delivery  teams 
or  by  the  yard  railway  service.  A  competent  man  is  detailed 
as  "  material  man "  who  sees  that  deliveries  are  promptly 
made  to  the  various  shops.  In  some  cases  material  is  ur- 
gently required  and  to  obtain  it  in  the  regular  way  will  cause 
delay;  in  these  cases  the  shops  are  authorized  to  attach  a 
pink  ^'  urgent  slip,"  described  later,  to  the  requisition  and  send 
the  requisition  to  the  store  by  special  messenger,  and  such 
requisitions  must  receive  immediate  attention. 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT  I75 

WORK,    REPORTS   OR   REQUISITIONS   REQUIRING  IMMEDIATE 

ACTION. 

A  pink  "  urgent  slip  "  is  used  to  attach  to  orders  for  work, 
requisitions,  or  other  papers  when  the  occasion  necessitates 
immediate  action.  Anyone  receiving  orders  or  papers  with 
one  of  these  sHps  attached  is  required  to  give  the  subject  im- 
mediate attention  and  give  all  such  work  right  of  way  over 
ordinary  work.  Anyone  using  these  pink  slips  must  sign 
them,  and  he  is  held  strictly  to  account  that  the  work  is  really 
urgent,  for  it  is  realized  that  if  this  is  not  done  and  the  slips 
are  used  for  work  that  is  not  urgent  the  object  of  the  slips 
will  be  defeated. 

TRANSPORTATION   OF   MATERIAL  FROM   SHOP  TO  SHOP  OR  FROM 
SHOP  TO  PLACE  OF  ERECTION. 

The  handling  of  material  from  shop  to  shop,  or  from  shop 
to  place  of  erection,  is  a  subject  which  receives  far  too  little 
attention.  In  large  establishments  where  there  are  a  number 
of  shops,  more  or  less  separated,  the  cost  of  handling  the 
material  may  be  more  than  the  cost  of  the  shop  work.  In 
almost  any  establishment  a  thorough  study  of  the  subject, 
and  systematization  of  methods,  will  result  in  marked  reduc- 
tions in  cost;  these  reductions  will  be  made  not  only  for 
the  work  itself,  but  savings  will  be  effected  by  eliminating 
unnecessary  delays  which  exist. 

In  many  large  establishments,  particularly  shipyards  and 
navy  yards,  there  are  no  standard  methods  for  handling  work 
from  shop  to  shop.  In  many  cases  work  done  in  one  shop  for 
another  may  be  delayed  several  days  after  completion  or  may 
even  remain  in  the  shop  until  sent  for  by  the  shop  requiring 
the  work.  It  is  not  unusual  to  see  helpers  and  laborers  carry- 
ing material  from  shop  to  shop;  in  many  cases  mechanics, 
assisted  by  helpers,  carry  work  from  the  shop  to  place  of 
erection ;  in  some  large  establishments  hand  carts  pushed  by 
laborers  or  helpers  are  the  usual  means  of  transportation  of 
all  but  heavy  articles.     It   is  hardly  necessary  to  point  out 


176  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

that  these  methods  are  uneconomical  in  the  extreme,  or  that 
very  little  investigation  and  study  can  effect  great  improve- 
ment. 

In  large  establishments  where  shops  are  scattered,  as  in  a 
shipyard,  it  will  pay  well  to  handle  all  material  between  shops, 
from  storehouse  to  shops,  and  from  shops  to  place  of  erection, 
by  means  of  a  plant  railway  system.  A  discussion  of  this 
important  subject  is  not  within  the  scope  of  this  work,  but  a 
few  suggestions  can  be  offered. 

In  nearly  all  establishments  it  will  be  difficult  or  even  im- 
possible to  use  the  standard  gauge  for  this  purpose,  on  account 
of  short  curves  which  are  necessary  to  reach  many  shops. 
The  use  of  the  narrow  gauge  on  the  other  hand,  makes  it 
impossible  to  receive  or  ship  direct  from  the  shops  by  standard 
railway  equipment,  unless  there  is  also  a  standard  gauge  track 
reaching  to  all  parts  of  the  plant;  this  duplication  of  track 
equipment  is  undesirable.  It  will  usually  be  found,  however, 
that  the  amount  of  standard  track  required  to  reach  the  im- 
portant receiving  and  shipping  points  and  for  the  locomotive 
cranes  is  not  great. 

The  best  arrangement  will  usually  be  a  narrow  gauge  sys- 
tem reaching  to  all  parts  of  the  plant,  and  a  limited  amount 
of  standard  track  reaching  the  principal  receiving  and  shipping 
points,  and  standard  track  for  the  use  of  locomotive  cranes. 
In  some  of  the  most  efficient  establishments  in  the  country, 
which  have  a  great  deal  of  standard  trackage,  a  complete 
narrow  gauge  equipment  has  been  installed,  and  the  manage- 
ment considers  both  systems  necessary  to  efficiently  handle 
the  large  output,  which  varies  from  small  weights  of  a  few 
hundred  pounds,  to  those  of  many  tons. 

With  a  railway  equipment  of  this  kind  a  railway  freight 
service  should  be  established,  and  hourly  trips  can  be  made, 
though  trips  made  every  two  hours  will  give  far  better  service 
than  is  now  obtained  in  the  great  majority  of  plants.  When 
such  a  service  has  been  established  it  will  be  necessary  to  pro- 
hibit material  being  transported  on  men's  backs  or  by  hand 
carts,  for,  strange  as  it  may  seem,  there  will  be  found  many 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT  I// 

foremen  and  workmen  who  maintain  that  transportation  in 
this  manner  is  necessary  to  avoid  delay.  No  doubt  it  is,  with 
foremen  who  cannot  look  ahead  two  hours,  or  even  one  hour, 
and  in  every  case  of  so-called  "  urgency  "  that  I  have  investi- 
gated it  was  found  that  the  urgency  was  caused  by  neglect  of 
foremen  or  assistant  foremen. 

The  transportation  question  is  one  of  great  importance,  and 
the  methods  to  be  followed  should  not  be  settled  until  a  search- 
ing investigation  has  been  made  of  conditions  and  the  require- 
ments, and  then  the  scheme  should  be  planned  in  all  of  its  de- 
tails. 

Some  years  ago  I  became  impressed  with  the  importance 
of  this  subject,  and  undertook  to  improve  the  transportation 
methods  at  the  Mare  Island  Navy  Yard.  Like  many  other 
managers,  I  did  not  have  the  equipment  which  was  required, 
and  had  to  make  the  most  of  resources  available.  At  this 
yard  there  was  standard  gauge  track  reaching  the  important 
parts  of  the  yard,  but  the  track  was  in  such  poor  condition 
that  the  necessary  speed  for  a  regular  service  could  not  be 
maintained,  and  there  was  not  sufficient  rolling  equipment  for 
this  service.  The  use  of  the  railway  equipment  was  confined 
to  handling  material  in  carload  lots,  and  the  use  of  several 
locomotive  cranes  for  handling  heavy  weights. 

A  regular  team  service  was  organized  for  handling  all  light 
material  between  shops  and  between  storehouse  and  shops, 
and  also  between  the  shops  and  ships  along  the  water  front. 

In  each  shop  a  receiving  and  dispatching  space  was  laid  out 
and  marked.  The  dispatching  space  has  two  divisions,  one 
for  work  which  has  been  completed,  but  not  tagged  for  ship- 
ment, and  another  for  articles  ready  for  shipment.  As  soon 
as  work  is  completed  it  must  be  immediately  placed  in  the 
space  for  completed  articles,  and  necessarily  shipment  promptly 
follows.  This  method  insures  prompt  handling  of  work  from 
shop  to  shop.  Articles  must  remain  in  the  receiving  space 
until  the  planning  department  receives  notification  of  arrival 
and  routes  the  work  to  the  machines.  After  this  system  was 
well  organized  the  use  of  hand  carts,  or  men  carrying  work 


178  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

from  shop  to  shop  was  prohibited,  except  in  urgent  cases. 
In  such  cases  the  foremen  were  authorized  to  use  these  meth- 
ods but  were  required  to  submit  to  the  shop  superintendent  a 
written  explanation  of  the  necessity  for  this  action. 

These  methods  were  a  great  improvement  and  resulted  in  a 
large  reduction  in  the  cost,  and  also  elimination  of  delays  in 
work  going  through  the  shops.  The  same  system  was  after- 
wards employed  in  other  large  navy  yards  with  equally  satis- 
factory results.  Later  the  railroad  tracks  were  improved, 
and  additional  equipment  secured.  The  team  service  was  then 
abandoned  and  replaced  by  a  railway  freight  service  on  regu- 
lar schedule.  This  service  was  very  satisfactory  and  eco- 
nomical. 

At  Mare  Island  the  shops  are  widely  separated,  and  in  gen- 
eral are  on  streets  nearly  parallel  to  a  straight  water  front. 
The  wide  gauge  tracks,  while  not  entirely  satisfactory,  reach 
all  of  the  important  shops,  and  pass  the  others  near  at  hand. 
It  is,  however,  impossible  to  enter  some  of  the  shops  on  ac- 
count of  short  curves.  There  are  very  few  plants  which  will 
be  found  as  well  adapted  to  the  wide  tracks  as  the  Mare  Island 
plant.  In  the  great  majority  of  plants  the  narrow  gauge 
system  is  necessary  if  material  is  to  be  efficiently  handled  in 
this  manner. 

CENTRAL   TOOL-GRINDING   AND    -ISSUE    ROOM. 

A  central  grinding  and  issue  room  was  established  in  one 
of  the  machine  shops.  The  grinding  machines  were  concen- 
trated in  this  room  and  all  tool  grinding,  with  a  few  excep- 
tions was  done  by  this  department.  In  the  illustration,  Fig. 
16,  there  is  shown  a  part  of  the  central  grinding  room;  the 
central  tool  issue  room  is  adjacent. 

The  grinding  room  was  placed  in  general  charge  of  the 
head  toolmaker,  but  was  in  direct  charge  of  a  young  ambitious 
helper  who  had  been  trained  for  the  work.  All  of  the  opera- 
tors in  the  grinding  room  were  trained  helpers,  and  these 
did  practically  all  of  the  grinding,  it  being  seldom  necessary 
to  detail  a  tool  room  hand  for  special  or  difficult  grinding. 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT 


179 


Adjacent  to  the  grinding  room  a  central  tool  issuing  room 
was  established.  Each  shop  sends  every  day  to  the  central 
issue  room  a  box  containing  its  dulled  tools;  these  tools,  ex- 
cept specials,  are  immediately  replaced  by  sharp  tools  from 
the  issue  room  and  the  box  returned,  a  note  being  made  on  the 
tool  shipment  sheet  of  the  tools  not  returned.  Tools  are 
assembled  by  classes,  and  ground  in  quantities,  but  special 
tools  received  from  shops  have  right-of-way  over  stock  grind- 


FiG.  16,    Part  of   Central  Tool  Grinding  Room,   Mare   Island  Navy 
Yard.    Central  issue  room  is  immediately  adjacent. 

ing  and  are  promptly  reground  and  returned  to  the  shop  from 
which  received. 

Each  workman  keeps  a  daily  record  of  the  tools  he  grinds ; 
at  the  end  of  the  week  a  summary  is  made  of  the  week's 
work  and  the  cost  per  tool  for  each  workman,  and  this  report 
is  submitted  to  the  shop  superintendent.  Very  satisfactory 
work  and  a  very  high  output  for  day  work  are  obtained  by 
these  methods. 

The  tools  ground  in  the  central  plant  are  for  the  following 
shops    or    departments :     Tools    for    shipfitter's    department, 


l8o  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

consisting  of  chisels,  drills,  countersinks,  reamers,  punches, 
shear  blades,  etc. ;  for  a  large  iron  worker's  department ;  all 
tools  for  three  machine  shops;  a  large  electric  shop;  a  large 
boiler  shop;  and  a  large  blacksmith  shop.  The  tools  for  the 
woodworking  shops  do  not  go  to  the  central  grinding  room, 
but  are  ground  in  these  shops  by  the  machine  hands. 

WEEKLY   CONFERENCE   OF    HEADS   OF   DEPARTMENTS   AND 
FOREMEN. 

Each  head  of  department  meets  the  foremen  once  a  week 
at  a  regular  time.  At  these  conferences  the  work  in  progress, 
proposed  improvements,  and  the  policies  of  the  management 
are  freely  discussed.  The  manager  frequently  attends  these 
meetings.     The  procedure  at  these  meetings  is  as  follows: 

(i)  Work  in  Progress.  Under  this  head  is  discussed  the 
time  of  completion  desired  on  the  various  work  under  way, 
whether  more  men  should  be  taken  on  or  drawn  from  work 
that  can  wait,  why  the  progress  on  certain  work  is  slow,  the 
difficulties  encountered,  etc.,  in  other  words,  a  full  discussion 
of  current  work.  It  is  my  experience  that,  when  foremen 
are  taken  to  task  for  delays,  it  is  always  the  "  other  fellow  " — 
he  couldn't  get  his  work  out  of  the  smith  shop,  or  the  foundry ; 
or  the  machine  shop  did  not  do  the  work  properly,  or  the 
laborer  did  not  get  the  crane  or  furnish  transportation  in 
time;  or  some  other  excuse  of  this  kind.  When  these  sub- 
jects are  taken  up  in  the  presence  of  all  the  foremen  the  ex- 
cuse of  the  "  other  fellow  "  is  not  so  frequent.  If  it  is  the 
"  other  fellow  "  who  is  to  blame  it  is'  brought  out  in  a  free 
discussion  of  this  kind.  At  this  meeting  the  head  of  the  de- 
partment settles  all  of  these  differences  and  lays  out  the  im- 
mediate work  as  he  wishes  it  done.  Every  foreman  fully  un- 
derstands his  wishes  and  directions,  and  has  no  excuse  if  he 
.does  not  work  with  the  others  to  the  desired  end. 

(2)  Suggestions  from  the  Foremen.  After  the  current 
work  discussion,  each  foreman  is  asked  in  turn  for  sugges- 
tions as  to  improvements,  either  of  facilities  or  methods. 
Every  suggestion  is  fully  discussed,  even  though  the  sugges- 


METHODS    TOWARD    SCIENTIFIC    MANAGEMENT  l8l 

tion  may  at  once  appear  to  the  head  of  the  department  as 
valueless,  and  all  foremen  are  invited  to  advance  their  ideas 
on  the  subject  though  it  may  not  affect  their  departments. 
Some  suggestions  are  adopted  at  once;  others  are  rejected; 
some  require  further  investigation. 

(3)  Suggestions  from  the  Department  Head.  After  all 
suggestions  from  the  foremen  have  been  discussed,  the  head 
of  the  department  takes  up  his  suggestions.  It  is  my  practice 
to  make  notes  during  the  week  of  the  subjects  to  bring  up 
at  the  next  conference.  In  addition  to  the  discussion  of  cur- 
rent work  and  general  improvements  in  appliances  or  methods 
it  is  my  practice  at  these  conferences  to  point  out  the  weak- 
nesses of  the  various  shops  —  not  only  those  discovered  in  the 
usual  rounds  of  inspection,  but  to  take  each  shop  in  turn  week 
by  week  and  make  a  diligent  hunt  for  the  uneconomical  meth- 
ods. At  the  next  meeting  these  are  all  brought  out  and  fre- 
quently samples  of  the  work  illustrating  the  uneconomical 
methods  are  exhibited. 

There  are  some  who  will  question  the  advisability  of  bring- 
ing up  these  weaknesses  in  this  manner  at  the  general  meeting, 
and  will  say  that  the  same  results  can  be  obtained  by  calling 
the  foreman  of  the  shop  and  going  over  these  subjects  with 
him  alone,  and  that  a  foreman  resents  a  public  demonstration 
of  this  kind. 

I  use  a  public  demonstration  of  this  kind  as  an  object  lesson 
to  all.  I  want  each  foreman  to  know  that  I  am  hunting  for  all 
uneconomical  methods.  I  demand  that  they  do  the  same. 
I  want  each  foreman  to  think  for  himself  "  How  can  I  save 
money  on  this  job?,"  No  doubt  the  foreman  does  resent  the 
public  demonstration,  but  he  will  try  to  see  that  there  are  no 
more  public  demonstrations  of  his  shop. 

After  the  meeting  is  over  a  stenographer  is  called  and  the 
necessary  instructions  are  given  on  all  matters  settled  and  a 
record  on  cards  is  made  of  all  unfinished  work;  these  cards 
are  brought  up  at  subsequent  meetings. 

I  attach  great  importance  to  these  conferences,  and  am  sat- 
isfied that  much  progress  is  made  by  means  of  them. 


l82  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 


DAILY  CONFERENCE  OF  MANAGER  AND  HEADS  OF  DEPART- 
MENTS. 

There  is  a  short  daily  conference  of  the  manager  and  the 
heads  of  departments.  This  conference  begins  at  4:15  p.  m., 
and  should  not  last  later  than  5  p.  m.  A  manager  may,  several 
times  during  each  day,  wish  to  discuss  subjects  with  heads  of 
divisions.  In  a  great  many  cases  the  question  is  not  of  im- 
mediate importance  and  can  readily  be  deferred  a  few  hours; 
these  questions  frequently  also  interest  more  than  one  head 
of  department.  Many  managers  send  for  heads  of  depart- 
ments every  time  a  subject  comes  to  their  minds  which  they 
wish  to  discuss,  and  often  a  head  of  department  is  sent  for 
three  or  four  times  a  day.  Usually  he  must  go,  no  matter  on 
what  work  he  may  be  engaged ;  this  breaks  in  on  his  work,  and 
but  few  managers  realize  how  much  this  interferes  with  the 
work  of  a  head  of  a  department  and  those  under  him.  The 
various  heads  of  division  also  frequently  wish  to  discuss 
routine  matters  with  the  manager ;  every  manager  must  be  ac- 
cessible to  these  heads,  yet  these  frequent  calls  interfere  with 
his  work,  and  prevent  concentrated  thought. 

There  is  a  great  deal  of  time  lost  from  these  two  causes, 
and  they  are  also  wearing  on  the  nerves  of  both  the  manager 
and  his  heads  of  division.  All  of  this  can  be  avoided  with 
the  daily  meeting. 

During  the  day  when  I  wish  to  send  for  a  head  of  division, 
I  ask  myself  if  the  question  cannot  wait  until  the  afternoon 
meeting,  and  in  nine  cases  out  of  ten  it  can;  if  it  can,  a  note 
is  made  of  the  subject  so  that  it  will  not  be  overlooked  at 
the  meeting.  The  heads  of  division  do  the  same;  if  the  ques- 
tion should  be  brought  to  the  immediate  attention  of  the  man- 
ager, the  head  of  division  goes  to  him,  otherwise  he  makes  a 
note  of  the  subject  to  bring  up  at  the  afternoon  meeting. 

At  this  meeting  the  manager  and  heads  of  department  have 
memoranda  of  the  subjects  they  wish  to  discuss.  The  work 
in  progress,  anticipated  delays,  etc.,  are  gone  over,  and  the 
manager   informs   his   assistants   of  any   change   in   policies. 


METHODS   TOWARD   SCIENTIFIC    MANAGEMENT  1 83 

There  is  a  tendency  for  these  meetings  to  lengthen  out ;  heads 
of  departments  will  bring  up  subjects  which  may  require  long 
explanations;  these  should  be  eliminated  from  the  general 
meeting;  everything  should  be  cut  short  and  if  much  consid- 
eration of  a  subject  is  required  all  concerned  should  note  it 
as  unfinished  business  and  take  it  up  for  consideration  sepa- 
rately, and  then  bring  it  before  the  next  meeting.  In  practice 
I  have  found  it  desirable  to  limit  the  time  of  the  daily  meet- 
ings to  forty-five  minutes. 


CHAPTER  XIII 
Machine  Shop  Methods 

general  instructions. 

The  planning  department,  under  the  general  direction  of  the 
Master  Machinist,  will  control  and  direct  all  work  done  in 
the  machine  shop.  All  orders  for  work  will  go  to  the  plan- 
ning department,  via  the  Master  Machinist;  this  department 
will  separate  the  orders  into  the  various  classes,  viz. :  urgent 
orders,  routine  orders,  manufacturing  orders,  plant  repair  or- 
ders, etc.  The  planning  department  will  analyze  these'  and 
lay  out  their  future  course.  It  will  be  the  aim  of  the  planning 
department  to  accomplish  the  following: 

First:  —  A  careful  analysis  of  the  work' to  determine  ex- 
actly what  is  to  be  done. 

Second: — ;The  determination  of  the  best  way  to  accom- 
plish the  work  in  the  quickest  time  at  the  lowest  cost. 

Third:  —  The  employment  of  the  best  machines,  best  facili- 
ties, and  the  best  men  available  to  carry  out  the  work 
in  the  best  way  as  previously  determined. 

The  instructions  of  the  planning  department  are  supreme 
in  designating  the  machine  on  which  the  work  is  to  be  per- 
formed, and  the  route  that  the  work  shall  follow,  and  no 
change  will  be  made  without  the  consent  of  the  planning  de- 
partment. The  gang  bosses  and  speed  bosses  are  invited  to 
offer  suggestions  to  the  planning  department  if  in  their  opinion 
the  methods  prescribed  can  be  improved,  but  under  no  cir- 
cumstances is  any  change  to  be  made  unless  such  change  is 
made  by  the  planning  department  and  shown  on  the  route 
sheet  and  instruction  cards. 

All  castings,    forgings,   material,   work   from  other  shops, 

184 


MACHINE    SHOP    METHODS  185 

and  work  from  the  ships  received  in  the  shop,  must  be  de- 
posited in  the  receiving  space  and  received  by  the.  receiving 
clerk,  who  will  record  the  arrival,  and  will  report  same  to 
the  inspector,  and  after  inspection  will  report  to  the  planning 
department. 

Work  received  from  the  outside  machinist  force  must 
bear  tags  identifying  the  work,  stating  the  requirements 
and  giving  the  date  on  which  the  work  is  wanted ;  for  work  re- 
ceived from  other  shops  the  necessary  information  is  given  on 
the  shop  orders  sent  direct  to  the  planning  department. 

All  work  spoiled,  mistakes  made,  and  damage  to  machinery 
or  appliances  must  be  reported,  to  the  planning  department 
on  damage  report  forms  in  accordance  with  detail  instructions 
for  making  these  reports.  These  reports,  with  report  of  inves- 
tigation, will  be  forwarded  to  the  shop  superintendent. 

In  case  tools  ordered  for  a  job  are  not  satisfactory,'  or 
the  condition  of  a  machine  is  not  satisfactory,  or  belts  are  not 
in  good  condition,  or  if  there  are  any  other  conditions  which 
will  interfere  with  carrying  out  expeditiously  the  work  called 
for  on  the  instruction  cards,  the  workman  discovering  the 
same  shall  immediately  report  to  the  gang  boss  or  speed  boss, 
whichever  is  in  charge  of  that  part  of  the  work,  and  the  latter 
shall  immediately  bring  this  to  the  attention  of  the  planning 
department  for  correction.  As  long  as  reports  are  not  made 
by  the  workmen  it  will  be  assumed  that  standard  conditions 
prevail,  and  excuses  for  unsatisfactory  output  wdll  not  be  ac- 
cepted. 

When  a  new  standard  pattern  is  made,  one  piece  will  be  cast 
and  machined  to  completion  under  the  direct  supervision  of 
a  representative  of  the  planning  department,  who  will  deter- 
mine if  the  pattern  is  entirely  satisfactory;  too  much  stock  for 
finishing  is  a  usual  fault,  and  careful  attention  should  be  given 
this  subject,  as  all  unnecessary  finish  must  be  eliminated.  If 
changes  are  required,  the  patternmaker  will  be  called  for  con- 
sultation, and  the  necessary  changes  ordered.  When  the  pat- 
tern is  satisfactory  the  pattern  shop  will  be  notified.  Defects 
in  castings  caused  by  faulty  patterns,  in  other  than  standard 


l86  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

patterns,  will  be  reported  to  the  shop  superintendent  by  the 
planning  department. 

The  planning  department  will  control  all  drawings  issued 
from  the  drawing  office  to  the  shop,  and  will  issue  by  checks 
the  same  to  workmen.  Any  errors  discovered  in  drawings, 
or  improvements  suggested,  should  be  reported  to  the  planning 
department  by  the  mechanic,  outside  quarterman  or  leading- 
man,  gang  boss  or  speed  boss,  and  that  department  will  fully 
investigate  the  subject  and  make  a  report  to  the  drawing  of- 
fice, in  accordance  with  standard  instructions  regarding  cor- 
rections to  drawings. 

The  planning  department  will  control  and  issue  all  shop 
orders  in  accordance  with  standard  instructions.  Care  will 
be  exercised  in  making  promises  of  dates  of  completion  to 
other  shops  that  the  promises  can  be  kept.  When  it  does  not 
appear  possible  to  complete  work  on  the  date  required  by 
another  shop,  the  subject  must  be  taken  up  immediately  with 
the  foremen  of  the  shop  requiring  the  work,  and  if  the  re- 
quirement cannot  be  changed  to  one  which  the  machine  shop 
can  meet,  immediate  report  must  be  made  to  the  shop  super- 
intendent and  instructions  requested.  The  planning  depart- 
ment will  report  to  the  shop  superintendent  failures  of  other 
shops  to  keep  promises. 

There  will  be  kept  in  the  planning  department  a  tickler 
blackboard;  on  this,  under  the  head  of  "to-day's  important 
business,"  will  be  given  the  work  due  other  shops  or  divisions 
on  that  date,  and  all  promises  made  by  other  shops  to  the 
machine  shop  which  fall  due  on  that  date,  and  all  important 
matters  which  must  receive  attention.  On  this  board  will  also 
be  shown,  under  the  heading  "  Black  List  "  all  delinquencies  in 
promises.  Each  day  at  four  o'clock  the  data  will  be  collected 
from  the  tickler  files  and  the  reports  of  work  received  and 
work  completed,  and  the  next  day's  important  business  and  the 
delinquencies  will  be  posted  on  the  board.  A  delinquent  no- 
tice will  be  sent  to  shops  or  divisions  which  have  failed  to  keep 
promises,  and  a  summary  report  of  all  delinquencies  will  be 
made  to  the  shop  superintendent. 


MACHINE   SHOP    METHODS  1 87 

The  planning  department  will  prepare  and  issue  detailed 
written  instructions  of  the  duties  of  tool  room  keepers,  topi 
delivery  boys,  move-men,  cranemen,  sweepers,  and  others  who 
have  general  duties  of  this  kind  to  perform.  In  each  case 
these  instructions  must  specify  in  detail  the  work  to  be  done, 
and  as  far  as  possible  must  prescribe  a  daily  task  for  each 
man. 

PLANNING   DEPARTMENT   AND    SHOP    STAFF. 

Chief  Planner.  It  will  be  his  duty  to  personally  study  all 
orders  received  and  familiarize  himself  with  the  requirements 
of  each  job.  He  will  first  determine  if  there  is  sufficient  in- 
formation available  to  carry  the  work  to  completion,  and  if 
not  he  will  take  steps  to  secure  the  necessary  information.  If 
drawings  or  sketches  are  required  he  will  notify  the  drafting 
office,  and  send  a  duplicate  to  the  shop  superintendent.  If 
a  manufacture  order  gives  specifications  or  is  "  per  sample," 
and  drawings  are  not  required,  but  the  specifications  are  not 
complete  or  the  sample  has  not  been  received,  the  planner  will 
immediately  notify  the  Assistant  Shop  Superintendent  who 
has  charge  of  this  work,  who  will  obtain  the  necessary  infor- 
mation. 

At  the  navy  yard  there  is  a  large  amount  of  work  of  this 
character;  ships  both  at  the  yard  and  away  from  the  yard 
make  requisitions  to  replace  broken  or  worn-out  parts,  and  it 
is  not  unusual  to  have  on  hand  at  one  time  500  orders  of  this 
kind,  which  call  for  parts  from  the  smallest,  as  a  small  special 
bolt  weighing  an  ounce,  to  a  defective  gear  which  may  weigh 
a  ton.  Until  there  is  more  standardization  in  ships  built  by 
different  ship  builders  it  will  not  be  practicable  to  have  draw- 
ings of  the  thousands  of  small  parts.  Ship  officers  in  mak- 
ing requisition  for  these  parts  usually  furnish  a  sketch  or  send 
a  sample  which  is  sent  to  the  shop,  but  very  frequently  the  in- 
formation furnished  is  incomplete  and  this  should  be  discov- 
ered immediately  after  the  order  is  received. 

With  the  necessary  information  available,  the  planner  will 
determine  the  operations  necessary  and  will  enter  these  on  the 


1 88  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

route  sheet  (in  duplicate),  Fig.  17.  Under  the  column  head- 
ing '*  machine  "  will  be  given  the  type  of  machine  on  which 
the  operation  is  to  be  performed  but  the  number  of  the  ma- 
chine will  not  be  entered  at  this  time.  It  is  impossible  at  this 
time  to  tell  when  the  work  will  be  undertaken  and  consequently 
the  work  cannot  now  be  routed  to  the  best  advantage  to  the  ex- 
act machine. 

He  will  prepare  the  shop  orders  for  castings  (via  pattern- 
maker), forgings,  or  work  that  may  be  required  from  other 
shops,  but  will  not  now  enter  dates  on  which  work  is  required. 
The  route  sheet  and  shop  orders  are  turned  over  to  the  ''  ma- 
terial man  "  referred  to  in  a  subsequent  paragraph,  and  he 
ascertains  the  date  that  material  can  be  obtained  and  informs 
the  head  planner. 

The  planner,  with  the  information  available  and  general 
knowledge  of  the  work  required  in  other  shops,  and  the  time 
required  to  do  the  work,  but  in  doubtful  cases  in  consultation 
with  the  foremen  of  other  shops,  ascertains  if  the  work  as  a 
whole  can  be  completed  on  the  date  given  either  on  the  order 
or  in  special  bulletins.  If  not,  he  must  immediately  notify 
the  shop  superintendent  by  telephone,  and  explain  the  reasons, 
and  obtain  instructions. 

If  the  work  can  be  completed  in  the  time  required,  the  plan- 
ner must  determine  the  date  on  which  material  must  be  de- 
livered and  dates  on  which  castings,  forgings  or  work  from 
other  shops  must  be  received  to  enable  the  work  in  the  ma- 
chine shop  to  be  accomplished  and  the  work  as  a  whole  com- 
pleted within  the  required  time.  He  now  inserts  these  dates 
on  the  shop  orders,"  and  enters  under  the  heading  "  Schedule 
of  Material  Ordered  "  on  the  route  sheet.  Fig.  17,  a  summary 
of  these  orders.  The  description  of  the  completion  of  the  or- 
ders, preparation  of  instruction  cards  and  entries  on  route 
sheet,  and  the  filing  of  this  sheet  are  given  in  subsequent  para- 
graphs which  describe  the  duties  of  other  members  of  the 
planning  staff. 

When  material,  castings,  forgings,  etc.,  have  been  received 
in  the  shop,  to  justify  beginning  the  work,  the  planner  will 


MACHINE    SHOP    METHODS 


189 


190  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

take  the  route  sheet  with  accompanying  instruction  cards  from 
the  file,  and  consulting  the  order-of-work  board,  which  shows 
the  status  of  work  in  the  shop,  will  route  the  work  to  the  ma- 
chines to  the  best  advantage,  and  he  will  th«:n  turn  over  the 
route  sheet,  with  the  instruction  cards,  and  standing  order 
slips,  to  the  "  standing-order-board  man  *  10  put  the  work  in 
progress. 

The  chief  planner  must  keep  track  of  the  progress  of  the 
work,  and  take  the  necessary  steps  to  make  good  any  delays 
which  may  occur  in  the  program  as  planned.  He  must  keep 
the  shop  superintendent  informed  of  all  delays.  The  shop 
superintendent  will  depend  on  him  to  get  the  work  through 
the  shop  in  stipulated  time,  and  if  the  planner  anticipates  that 
the  ultimate  completion  of  the  work  will  be  delayed  he  should 
promptly  notify  the  superintendent. 

Each  day  at  four  o'clock,  from  the  ticklers,  reports  of 
receipt  of  material  and  work  from  other  shops,  reports  of  com- 
pleted work,  he  will  make  the  reports  of  delinquencies,  and  will 
post  the  "  Important  Business  Board  "  for  the  following  day. 
The  "  Important  Business  Board  "  for  one  of  the  shops  is 
shown  in  the  illustration.  Fig.  18. 

The  chief  planner  will  prepare  and  issue  detailed  written 
instructions  of  the  duties  of  tool  room  keepers,  tool  delivery 
boys,  move  men,  crane  men,  sweepers,  and  others  who  have 
general  duties  of  this  kind  to  perform.  In  all  cases  possible 
he  will  prescribe  for  each  man  a  daily  task. 

The  chief  planner  will  visit  the  shop  as  often  as  possible 
and  at  least  twice  each  day,  to  observe  the  progress  of  work, 
and  to  consult  with  the  gang  bosses  and  speed  bosses;  these 
bosses  should  be  encouraged  to  make  suggestions  regarding 
routing  work. 

The  chief  planner  will  train  a  man  selected  by  the  Master 
Machinist  to  perform  the  duties  of  chief  planner.  When  the 
quantity  of  work  in  the  shop  warrants;  this  man  will  be  de- 
tailed to  assist  the  planner  and  during  the  absence  of  the  latter 
will  take  up  his  work. 

Material  Man.     The  material  man  will  be  in  charge  of  the 


MACHINE   SHOP    METHODS 


191 


I,  lllJIUliWtiilli 


192  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

shop  Store.  When  the  work  in  the  shop  warrants,  the  fore- 
man will  assign  an  intelligent  laborer  to  assist  liim.  The  ma- 
terial man  will  keep  a  record  of  issues  of  material  to  the  va- 
rious jobs,  will  keep  up  the  stock,  and  make  returns  to  the 
main  storehouse  in  accordance  with  standard  instructions.  The 
material  man  will  obtain  information  regarding  material  on 
hand,  dates  when  material  required  by  purchase  can  be  ob- 
tained, and  delays  in  delivery.  He  will  keep  the  chief  planner 
informed  of  these  conditions. 

When  the  route  sheets  have  been  obtained  from  the  chief 
planner,  he  will,  after  receiving  instructions  from  the  chief 
planner  of  the  kind  and  quantity  of  material  required,  obtain 
information  from  the  storehouse  and  other  shops  of  the 
amount  of  material  on  hand,  and  if  additional  material  is 
needed,  will  obtain  information  of  dates  when  this  can  be 
obtained  by  purchase,  and  he  will  give  this  information  to 
the  chief  planner.  After  the  latter  has  decided  the  date  on 
which  the  material  is  required,  he  will  make  the  requisition 
for  the  material  (as  per  standard  instructions)  specifying  the 
dates  on  which  it  is  required.  He  will  record  on  the  route 
sheet,  Fig.  17,  under  the  heading  "  Schedule  of  Material  Or- 
dered," a  summary  of  the  material  ordered.  When  ma- 
terial is  reported  received,  he  will  check  it  against  the  re- 
tained copy  of  the  requisition,  will  tag  it  with  the  name  and 
number  of  the  job,  and  will  have  the  material  stored  until 
used.  He  will  enter  on  the  route  sheets  the  dates  on  which 
the  material  is  received. 

He  will  teach  the  man  detailed  to  assist  him  the  duties  of 
material  man,  in  order  that  he  may  be  able  to  perform  the  du- 
ties during  the  absence  of  the  material  man. 

Instruction  Card  Man.  It  is  the  duty  of  the  instruction 
card  man  to  prepare  the  written  instruction  cards  issued  to 
the  workmen.  These  cards  tell  the  workmen  and  shop  bosses 
what  is  to  be  accomplished  at  a  machine  or  a  bench  and  the 
machine  or  bench  to  which  the  work  is  to  be  moved  for  the 
next  operation.  On  the  instruction  card  will  also  be  placed 
the  order  number  to  which  the  work  is  to  be  charged,  the  gen- 


MACHINE    SHOP    METHODS  I93 

cral  and  detail  drawing  to  be  followed,  or  sample  to  be  fol- 
lowed, and  special  tools  or  jigs  that  will  be  used.  If  special 
instructions  are  to  be  given  a  workman  the  instruction  card 
will  specify  the  man  who  is  to  give  the  instructions.  When 
the  premium  system  or  piece-work  system  is  employed,  the 
standard  times  or  piece  rates  will  also  be  given. 

The  route  sheet  with  the  operations  given  is  passed  from 
the  head  planner  to  the  instruction  card  man,  who  prepares 
the  instruction  cards  for  the  job.  He  will,  from  the  card 
index  of  jigs  and  special  tools  on  hand,  determine  if  any  are 
suitable  for  the  job  and  if  so  specify  them  on  the  cards.  He 
will  determine  if  new  special  tools  or  jigs  appear  to  be  war- 
ranted, and  in  this  connection  will  consult  the  head  toolmaker ; 
if  in  his  judgment  additional  tools  are  warranted  he  will  pre- 
pare an  estimate  of  the  cost  of  these  tools,  and  submit  a  re- 
port to  the  master  machinist,  giving  savings  that  will  be  made 
by  the  tools  and  their  estimated  cost.  H  the  tools  are  author- 
ized by  the  master  machinist  or  shop  superintendent  regular 
orders  will  be  issued  for  the  manufacture  and  the  instruction 
card  man  notified,  and  these  tools  will  be  specified  on  the  in- 
struction card. 

The  instruction  card  man  will  prepare  the  standing-order 
slips,  which  are  briefs  of  the  instruction  cards  and  which  are 
to  be  placed  on  the  standing-order  board.  A  sample  instruc- 
tion card  is  shown  in  Fig.  19,  and  a  sample  standing-order 
slip  in  Fig.  20.  The  instruction  cards  and  standing-order  slips 
will  be  placed  in  the  envelope  on  the  back  of  the  original  route 
sheet,  and  the  whole  turned  over  to  the  "  standing-order-board 
man." 

The  instruction-card  man  will  visit  the  shop  as  often  as  pos- 
sible, and  not  less  than  twice  a  day,  to  observe  the  progress 
of  work  in  machines,  the  use  of  the  tools,  and  to  consult  with 
the  speed  and  gang  bosses.  He  will  encourage  suggestions 
from  these  bosses. 

It  will  be  the  duty  of  the  instruction-card  man  to  make  to  the 
master  machinist  recommendations  for  the  purchase  or  man- 
ufacture of  new  tools  for  machines,  jigs,  dies,  etc.;  the  head 


194  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

toolmaker  will  therefore  submit  his  recommendations  on  this 
subject  to  the  instruction-card  man. 

The  instruction-card  man  will  train  a  man  selected  by  the 
master  machinist  to  perform  the  duties  of   instruction-card 


Complete  ^  ^_^ 

Work  assigned  at...Z.>^.-  M r^.rxZ. By....<^yr^/'^. Gang  boss 

Machine  set  and  work  accepted  by..A^4//F/^^>^..Speedlyoss,zt/iC>.jt4..M...^^.Ty.'7 
Work  completed  at.//..>4..M....^.T./<5...By  check  No^/^JSTJT 

I  tern  f*5Ci</.7r.7-^2r4f....C.P^^.  ..^-^..'*'- ....I272r^^^ 


The  following  work  will  be  completed  at  \/f.S^.'.A7^  3' 
Upon  completion  will  be  moved  to.J7^.Af7,.^ 
Detail  instructions: 

,*73/^ir/y...../^i^^^ 

.O.iOAf.rr'^.c.rr W^  zn^ . . . ./.  n^.49.^^}/!^:.  iQi^.ajir^T' 


o<r«/5A<vff4Prx    ^Z!5».fc?  ^. jt 


^y  Estimated  time _ _ 

Refer  to  plan  No Y^C  Actual  iwcit./jQ.j/.ie.^- 


Fig.  19.     Machine  Shop  Instruction  Card. 


MFG.  DRPT    614 


STANDING  ORDER 


Afachine  No.-V/^^^'^    .  Date^-^  ^l-'^^ 19V:tf 

Name  of  Piece  and  Operation  -.^^^J^J^^  'T'^4^ CTo^ 4~ 2^!^, — 


Fig.  20.     Standing  Order  Slips.    These  are  placed  on  the  standing 

order  boards. 

man.  When  the  quantity  of  work  in  the  shop  warrants,  this 
man  will  be  detailed  to  assist  the  instruction-card  man  and  in 
the  absence  of  the  latter  will  take  up  his  work. 


MACHINE    SHOP    METHODS  I95 

Standing-Order-Board  Man.  It  is  the  duty  of  the  board 
man  to  attend  the  standing  order  board,  the  tickler  files  for 
work  promised,  and  to  see  that  the  "  move  man  "  promptly 
moves  completed  work  from  a  machine  to  the  place  for  the 
next  operation.  When  he  receives  the  route  sheets,  he  will 
file  by  job  order  numbers  the  originals  which  are  accompanied 
by  the  instruction  cards  and  standing-order  slips;  the  dupli- 
cates will  be  placed  in  a  tickler  file  by  dates  on  which  the  work 
in  the  machine  shop  should  begin.  He  will  keep  the  chief 
planner  informed  of  work  due  in  the  shop  and  not  received. 
When  the  necessary  castings,  forgings,  and  other  material 
necessary  to  proceed  with  work  is  in  the  shop  he  will  inform 
the  chief  planner  and  after  the  latter  has  indicated  on  the 
route  sheet  the  number  of  the  machine  or  bench  for  each 
operation,  the  board  man  will  mark  these  numbers  on  the 
instruction  cards  and  standing-order  slips,  and  will  issue  the 
instruction  cards  to  the  workmen  and  place  the  standing-order 
slips  on  the  board.  It  is  the  duty  of  the  board  man  to  see 
that  the  standing-order  slips  on  the  boards  correctly  repre- 
sent the  location  of  the  work  in  the  shop;  it  is  his  duty  to  re- 
cord on  the  route  sheet  in  the  columns  "  Ordered  to  Ma- 
chine "  and  "  Operation  Completed "  the  progress  of  the 
work. 

The  board  man  must  instruct  an  understudy  selected  by  the 
master  machinist,  who  will  perform  the  duties  in  the  absence 
of  the  board  man. 

Shop  Clerk.  The  shop  clerk  will  keep  a  card  record  of  the 
workmen,  date  of  employment,  rate  of  pay,  promotions,  re- 
ductions, home  address,  when  disciplined,  record  of  absences, 
breakage  of  tools,^and  from  informirfion  supplied  by  the  master 
machinist  notes  regarding  each  man's  ability. 

He  will  have  charge  of  filing  and  indexing  all  drawings  and 
the  issue  of  plans  to  the  workmen.  He  will  have  charge  of 
all  office  correspondence  and  must  keep  it  indexed.  He  will 
receipt  for  job  orders,  and  after  they  have  been  noted  and 
initialed  by  the  master  machinist  will  file  them  in  the  job  order 
file ;  he  will  file  shop  orders ;  he  must  keep  the  files  "  Work  in 


196  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

Progress  "  and  "  Work  Waiting  "  to  correctly  show  the  status 
of  the  work. 

He  will  receive  daily  the  time  tickets  of  the  men  and  after 
checking  these  to  see  that  they  have  been  passed  by  the  gang 
bosses,  will  arrange  them  by  job  numbers  and  send  them  to 
the  main  office. 

He  will  do  all  clerical  work  as  directed  by  the  main  office 
and  the  master  machinist. 

He  will  be  present  at  the  check  board  at  each  muster,  and 
will  make  a  report  to  the  main  office  of  the  men  not  muster- 
ing. 

He  will  instruct  an  understudy  selected  by  the  master  ma- 
chinist, who  will  perform  the  duties  in  the  absence  of  the 
clerk. 

Time-Study  Man.  The  time-study  man  will  be  assigned  his 
work  by  the  master  machinist  and  the  shop  superintendent. 
He  will  make  time  studies  of  work  on  various  machines  to 
determine  defects  in  methods  and  equipment.  Until  methods 
are  standardized  he  will  work  with  assistants  of  the  shop  super- 
intendent detailed  to  the  various  shop  investigations.  After 
methods  are  standardized  the  time-study  man  will  make  unit 
time  studies  of  the  various  operations,  to  determine  the 
standard  time  for  each  operation. 

The  Foreman.  The  master  machinist  will  be  the  exception 
man.  Much  of  the  detail  work  which  a  foreman  is  usually 
expected  to  look  after  has  been  assigned  to  the  planning  room 
staff;  this  gives  the  master  machinist  the  time  to  look  after  the 
big  things,  to  properly  deal  with  the  exceptions  brought  to  his 
attention,  and  to  study  his  men,  particularly  those  in  super- 
visory positions. 

At  first  his  time  will  be  taken  up  with  coordinating  the  va- 
rious functional  foremen,  and  smoothing  out  the  difficulties. 
When  the  system  is  in  good  working  order,  and  each  man 
knows  his  duties,  the  friction  and  many  of  the  difficulties  will 
disappear.  He  will  then  have  only  the  exceptions  brought 
to  his  attention,  and  will  have  time  to  study  the  big  things  in 
the  shop  and  study  the  men.     The  study  of  the  men  is  a  most 


MACHINE    SHOP    METHODS  igj 

important  part  of  his  duty;  it  is  difficult  to  find  satisfactory 
men  for  the  various  functional  duties,  and  the  best  men  avail- 
able must  be  secured. 

As  a  matter  of  fact,  the  various  positions  are  less  difficult 
to  fill  than  the  positions  of  the  old-time  gang  bosses  or  as- 
sistant foremen,  who  had  a  little  of  all  the  duties  of  the  va- 
rious functional  foremen;  but  there  is*  this  difference,  the 
old-time  gang  bosses  or  assistant  foremen  did  not  do  the  work 
they  were  supposed  to  do,  nor  could  they  do  it,  but  this  did 
not  show  up  and  no  one  was  the  wiser;  but  with  the  new 
system  it  immediately  shows  if  a  man  fails  to  do  the  work 
assigned  him.  The  difficulty  of  obtaining  men  to  satisfac- 
torily fill  the  functional  positions  is  excellent  proof  of  defects 
of  the  old  system;  men  who  were  looked  upon  as  satisfactory 
assistant  foremen  and  who  were  supposed  to  look  out  for 
work  now  assigned  to  several  men,  fail  utterly  when  defi- 
nitely assigned  to  one  of  the  many  jobs  that  they  previously 
had. 

The  foreman  must  study  the  men  well,  so  as  to  obtain  the 
very  best  man  available  for  each  position.  This  is  of  ad- 
vantage in  two  ways ;  it  not  only  gives  the  best  man  for  the 
place,  but  it  also  shows  the  men  in  the  shop  that  a  deserving 
man  will  be  promoted,  and  in  many  shops  this  will  bring  to 
life  ambition  almost  dead,  while  in  all  shops  it  will  spur  many 
men  on  to  do  their  very  best. 

He  will  be  the  disciplinarian  of  the  shop;  he  must  see  that 
every  man  receives  exact  justice;  his  success  in  performing 
this  duty  will  have  a  great  influence  in  making  the  operations 
of  the  shop  successful. 

In  an  establishment  known  to  the  writer,  it  was  the  prac- 
tice to  hunt  for  the  deserving  men  so  as  to  advance  them; 
it  was  the  practice  to  hunt  for  men  who  were  trying  to  better 
themselves,  to  assist  them;  it  was  the  practice  to  advance  the 
young  men  if  they  could  produce  the  results;  results  were 
required  and  if  obtained  those  responsible  were  rewarded. 
The  result  was  that  many  men  in  the  shops  gave  much  time 
outside  of  working  hours  to  study;  every  evening  the  public 


198  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

library  was  crowded  with  men  from  this  place  seeking  knowl- 
edge. The  management  changed  and  there  was  not  the  seek- 
ing for  the  best  men  on  the  part  of  the  management  —  very 
little  time  was  given  to  the  study  of  the  men.  In  a  few 
months  there  was  little  study  outside  of  working  hours  and  the 
public  library  was  deserted  in  the  evenings  when  before  it  had 
been  well  patronized  by  men  from  this  establishment. 

Gang  Boss.  The  gang  boss  has  charge  of  the  preparation 
of  all  work  up  to  the  time  that  the  piece  is  set  in  the  ma- 
chine. It  is  his  duty  to  see  that  every  man  has  at  all  times 
at  least  one  piece  of  work  at  his  machine,  with  all  the  jigs, 
templets,  drawings,  driving  mechanism,  sling  chains,  tools, 
etc.,  ready  to  go  into  his  machine  as  soon  as  the  piece  he  is 
actually  working  on  is  completed.  The  gang  boss  must  show 
his  men  how  to  set  their  work  in  their  machines  in  the  quick- 
est time  and  see  that  they  do  it.  He  is  responsible  for  the 
work  being  accurately  and  quickly  set,  and  should  be  not  only 
able,  but  willing  to  pitch  in  himself,  and  show  the  men  how 
to  set  the  work  in  record  time.  After  this  is  done  he  will 
turn  the  machine  and  workman  over  to  the  speed  boss,  who 
can  refuse  to  accept  the  job  if  he  is  not  satisfied  with  the 
conditions;  if  the  job  is  accepted  by  the  speed  boss,  he  is 
wholly  responsible  for  future  results.  As  soon  as  the  ma- 
chining is  completed,  the  job  reverts  to  the  gang  boss,  who 
is  responsible  for  taking  the  work  out  of  the  machine  and 
for  moving  work  from  one  place  to  another,  according  to 
routine  instructions.  The  gang  boss  is  responsible  for  order 
and  the  observance  of  shop  rules. 

.  Speed  Boss.  The  speed  boss  must  see  that  the  proper  cut- 
ting tools  are  used  for  each  piece  of  work;  that  the  work  is 
properly  driven ;  tliat  the  cuts  are  started  in  the  right  parts 
of  the  piece,  and  that  the  best  speeds  and  feeds  and  depths 
of  cut  are  used.  This  work  begins  only  after  the  piece  is 
in  the  machine  and  ends  when  the  actual  machining  ends. 
The  speed  boss  must  not  only  advise  his  men  how  to  best  do 
this  work,  but  he  must  see  that  they  do  it  in  the  quickest  time, 
and  that  they  use  the  speeds  and  feeds  and  depth  of  cut  as 


MACHINE    SHOP    METHODS  1 99 

directed  on  the  standard  sheets.  In  many  cases  he  is  called 
upon  to  demonstrate  that  the  work  can  be  done  in  the  speci- 
fied time  by  doing  it  himself  in  the  presence  of  his  men.  He 
is  also  responsible  for  floor  work  and  vise  work  after  the 
gang  boss  has  provided  tools,  drawings,  etc.,  in  the  same 
manner  as  described  for  machine  work.  He  is  solely  re- 
sponsible for  the  quality  and  quantity  of  work  turned  out. 
He  will  properly  instruct  the  workman  whenever  such  in- 
struction is  necessary. 

Inspector.  The  inspector  will  inspect  all  work  received 
from  other  shops,  and  no  work  will  be  removed  from  the 
receiving  floor  until  inspected  and  the  receiving  clerk  notified. 
He  will  inspect  work  after  each  operation  and  if  satisfactory 
will  O.  K.  the  instruction  card.  In  manufacture  work  where 
a  number  of  pieces  are  to  be  made,  he  will  inspect  the  first 
piece  for  each  operation,  and  if  correct,  will  mark  the  piece 
for  identification  and  return  it  to  the  workman  as  a  sample 
by  which  to  finish  the  remainder  of  the  lot. 

He  will  inspect  the  first  piece  manufactured  from  a  new 
standard  pattern,  and  will  consult  the  gang  boss  and  speed 
boss  regarding  difficulties  encountered,  and  will  report  to 
the  chief  planner  whether  or  not  the  pattern  is  satisfactory. 

Move  Man.  He  will  move  work  to  the  place  designated 
on  the  instruction  card  for  the  next  operation.  No  work 
will  be  moved  unless  the  instruction  card  bears  the  O.  K.  of 
the  inspector.  After  the  work  has  been  moved  the  move  man 
will  initial  the  instruction  card  and  turn  it  in  to  the  standing 
order-board  man. 

Head  Toolmaker.  The  head  toolmaker,  acting  under  in- 
structions from  the  planning  department,  will  provide  the 
machines  with  the  best  tools,  jigs  and  appliances.  It  will 
be  his  duty,  in  cooperation  with  the  instruction-card  man,  to 
make  a  special  study  of  all  duplication  work,  so  as  to  provide 
such  special  tools  and  jigs  as  the  work  will  warrant.  He 
will  submit  lists  of  tools  required  to  the  instruction-card  man 
for  the  approval  of  the  master  machinist  and  superintendent. 
All  special  tools  when  manufactured,  tested  and  found  satis- 


200  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

factory  will  be  reported  to  the  instruction-card  man  to  be 
entered  on  his  card  index  of  special  tools  and  jigs,  in  order 
that  they  may  be  utilized  on  future  work. 

The  head  toolmaker  will  be  in  charge  of  the  tool  rooms, 
and  all  machine  tools  in  the  shops,  and  it  will  be  his  duty 
to  see  that  all  machines  and  tools  are  kept  in  the  highest  state 
of  efficiency.  He  will  have  as  assistants,  in  addition  to  the 
regular  tool-room  force,  a  repair  man  and  a  belt  man,  whose 
duties  are  described  in  the  following  paragraphs. 

Repair  Man.  It  is  his  duty  to  see  that  each  workman  keeps 
his  machine  clean,  free  from  rust,  and  that  he  oils  and  treats 
is  properly.  He  will  see  that  a  damage  report  is  submitted 
for  any  damage  to  a  machine  other  than  fair  wear  and  tear, 
in  accordance  with  the  instructions  for  making  damage  re- 
ports. He  will  see  that  all  standards  established  for  the  care 
and  maintenance  of  machines  and  their  accessories  are  rigidly 
maintained.  He  will  see  that  the  tool  lists  on  lockers  at 
machines  are  kept  up  to  date,  and  that  such  lists  are  accurate 
inventories  of  the  tools  and  appliances  supplied  the  machines. 
When  a  key  of  a  locker  is  turned  in,  owing  to  a  workman 
being  shifted  from  the  machine,  he  will  check  up  and  inspect 
the  tools  and  appliances  belonging  to  the  machine.  He  will 
make  ordinary  repairs  to  the  machine  tools. 

Belt  Man.  He  will  be  responsible  for  the  care  of  all  belts 
and  will  follow  the  detailed  instructions  issued  regarding  the 
care  of  belting.  He  will  oil  all  main  shafting  and  counter- 
shafting. 

DELIVERY    OF    TOOLS    TO    MACHINES. 

It  will  be  the  duty  of  the  gang  boss  to  see  that  every  ma- 
chine is  supplied  in  advance  with  proper  tools.  Each  ma- 
chine is  supplied  with  a  handled  tool  tray.  In  a  holder  on 
this  tray  is  a  pad  with  a  pencil  attached  by  a  string.  The 
gang  boss  writes  on  the  pad  the  tools  required  for  the  next 
job.  The  tool  boys  will  make  trips  around  the  shop  every 
fifteen  minutes  to  bring  new  tools  from  the  tool  room  and 
to  return  dulled  tools.     When  it  is  necessary  to  make  special 


MACHINE    SHOP    METHODS  20I 

lathe  or  planer  tools  for  a  job,  the  gang  boss  will  have  two  of 
each  kind  made,  so  that  while  one  tool  is  in  the  machine  the 
other  can  be  reground.  After  the  job  is  accepted  by  the 
speed  boss  he  is  responsible  for  the  tools,  and  must  see  that 
the  tools  are  kept  in  good  condition  and  that  the  workman 
does  not  have  to  wait  for  a  sharp  tool.  The  gang  boss  is 
responsible  for  any  delays  due  to  lack  of  proper  tools,  the 
speed  boss  is  responsible  for  delays  due  to  lack  of  sharp 
tools. 

THE    OPERATION    OF    THE    SYSTEM. 

In  the  planning  room  are  the  "  standing-order  boards." 
They  consist  of  a  number  of  boards  about  three  feet  square, 
mounted  in  a  cluster  in  a  frame  and  provided  with  sash  cord 
and  balancing  weights.  The  "  down  "  position  of  the  board 
brings  the  lower  edge  of  the  board  about  36  inches  above  the 
floor,  this  being  a  convenient  working  height.  When  a  board 
is  not  in  use  it  can  be  raised  out  of  the  way,  exposing  the 
next  board  in  the  rear.  On  these  boards  there  is  marked 
the  number  of  every  machine  and  vise  in  the  shop.  These 
are  conveniently  grouped;  the  turret  lathes  being  grouped  on 
one  board,  the  shapers  on  another,  planers  on  another,  large 
engine  lathes  on  another,  small  engine  lathes  another,  milling 
machines  another,  vises  another,  etc. 

Under  the  number  of  each  machine  or  vise  there  are  three 
small  spaces,  the  size  of  the  standing-order  slips,  each  pro- 
vided with  hooks  on  which  the  standing-order  slips  are  hung. 
The  slip  hanging  on  the  upper  hook  shows  that  job  to  be 
actually  in  the  machine ;  the  slip  on  the  next  lower  hook  shows 
that  the  job  is  at  the  machine,  provided  with  tools,  drawings, 
and  all  necessary  information  and  is  to  go  in  the  machine 
immediately  the  job  in  the  machine  is  finished.  The  slips  on 
the  lowest  hooks  are  the  jobs  in  the  shop,  but  not  necessarily 
at  the  machine  for  which  the  gang  boss  is  providing  the 
necessary  tools,  drawings,  etc.  There  will  often  be  a  num- 
ber of  slips  on  the  lowest  hooks;  the  slip  on  top  is  the  one 
that  is  to  go  to  the  second  hook,  and  for  which  tools,  etc.. 


202 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


should  be  provided ;  the  rotation  numbers  on  the  slips  indicate 
the  order  in  which  the  work  will  be  taken  up. 

In  a  case  underneath  the 
boards  are  filed  the  route 
sheets  and  instruction  cards. 
It  is  by  means  of  the 
boards  that  the  planner  can 
keep  track  of  the  work  as  it 
goes  through  the  shop.  The 
illustration,  Fig.  21,  shows 
clearly  the  boards  and  the 
standing-order  slips. 

At  each  machine  there  is  a 
holder  which  has  three  pock- 
ets for  instruction  cards. 
These  cards  represent  the 
same  jobs  as  the  standing  or- 
ders for  that  machine  on  the 
board  in  the  planner's  room. 
The  card  in  the  upper  pocket 
represents  the  work  in  the 
machine.  The  card  in  the 
middle  pocket  represents  jobs 
at  the  machine  for  which 
tools,  jigs,  drawings,  etc.,  are 
assembled.  The  cards  in  the 
lower  pocket  represent  jobs 
in  the  shop,  but  not  necessar- 
ily at  the  machine,  for  which 
tools,  jigs,  drawings,  etc.,  are 
being  collected. 

Upon  the  completion  of  the 
job  represented  by  the  card 
in  the  top  pocket  the  work- 
man will  remove  the  card,  note  the  time  of  completion  on  its 
face,  and  hang  it  on  the  hook  for  completed  work,  and  will 
shift  the  other  two  cards  up.     The  holders  for  the  cards  and 


Fig.   21.     Standing   Order   Boards 
in  the  machine  shop  planning 

DEPARTMENT.  FrOM  THESE  ANY 
JOB  IN  THE  SHOP  CAN  BE  IMME- 
DIATELY   LOCATED. 


MACHINE    SHOP    METHODS 


203 


also  the  hook  for  the  completed  cards  are  shown  in  the  illus- 
tration, Fig.  22. 

The  tool  boy  will  collect  the  completed  instruction  cards 
and  take  them  to  the  planning 
department.  Here  the  standing 
order  for  this  job  will  be  re- 
moved from  the  board  and  the 
instruction  card  will  be  put  on 
the  '*  move  hook,"  where  it  will 
be  found  by  the  move  man  on 
his  rounds,  and  serves  as  an  or- 
der to  him  to  make  the  move 
to  the  machine  designated  on 
the  card.  After  the  work  has 
been  moved,  the  move  man  will 
initial  the  card  and  return  it  to 
the  planning  department,  this 
serving  as  a  notice  to  this  de- 
partment that  the  work  is  at  the 
next  machine.  This  method 
will  be  continued  from  machine 
to  machine  until  the  work  is  in- 
spected and  ready  for  delivery. 

Other  forms  used,  which  re- 
quire no  explanation,  are  shown 
in  Fig.  23,  Page  204,  a  damage 
report;  Fig.  24,  Page  205,  a 
shop  observation  card;  Fig.  25, 
Page  206,  a  shop  record  card; 
and  Fig.  26,  an  index  card  for 
special  tools  and  jigs.  The  shop 
observation    card    is    used     for 


Fig.  22.  Holder  for 
instruction  cards 
issued  to  the 
WORKMEN.        Time 

TICKETS  ARE  SHOWN 
ON  HOOKS  ABOVE 
THE    HOLDER. 


stop-watch    time    studies. 


COOPERATION. 


There  must  be  cooperation  among  the  planning-room  staff, 
and  also  among  the  planners  and  the  gang  bosses.  While 
each  man  has  a  definite  duty  to  perform  the  result  of  his 


204  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


Mfg.  Dept  #807 

DAMAGE  REPORT 
MEG. DEPT 
NAVY  YARD, MARE  ISLAND 


Date  :  -^-"'/X^  ^2^-  Che ck  No .  /^^^—~ 

I  have  damagecj  the  following  work  under  Jo"b 
Order  No .  ^^•^■>^^^^^. 


Report  of  man  in  charge  of  work: 

Jd^^^!7^/c//!i/ia ZS^_j?35r^  2:l.^$1_^^<u3:: 


Report  of  master: 


*7p/9r  T^A/y^y^^^y^' 


replace 
Estimate  to        damage 


Action  of  Naval  Constructor: 
-^^li^-gieg/y^^ 


Fig.  23.    Damage  Report  submitted  for  damage  to  work  or  machines. 


MACHINE    SHOP    METHODS 


205 


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COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


Plan  No 


% 


OPERATIONS, 


OB'N  Time  ^ojtjs'  S^  -T^^^T^j^  C^/VT^y^   y3o^-r. 
on  one     ..--    ^^         _   ,__,    ...^^ 

^on!  one!  ^'>^^'^^^^<^^  ^V^^^  '^^/yy^C 

remarks; 


Rate 


Fig.  25.     Shop  Record  Card  for  recording  observation  times  and  average 

TIMES   AS    taken    FROM    TIME   TICKETS. 


SPECIAL  TOOLS  &  JIGS 
for  ^^ 

/  zy     ^  Plan  No.   3  O 


JIG  No 


OPERATIONS  USED  FOR 


^'^-/ 


/g^svp/.yg    Co^M-y^  y^o/9  C^A^-r^/c^lSo^'r 


/r-^-^ 


7^/g>    CoYE/fL 


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f/rc^  A-  Cut  tf/^oa^^  lP'0/9  Ipuja/a^^/^  Sr/P/P 


i£/?a   {^a/7j£c^  y^/r^Q 


y^^/Y€£L 


^-^'V 


D/^/^L   SicCot/A^r£/^S/jy/<    //oJ-^:r  /^j^  j/tij.oy/rsDat^SS^ 


Fig.  26.    Index  Card  for  special  tools  and  jigs.     This  index  is  in  the 

PLANNING   department   AND    THE    INSTRUCTION    CARD    MAN    CAN    QUICKLY 
DETERMINE   THE   TOOLS   ON    HAND   FOR   EACH    JOB. 


MACHINE    SHOP    METHODS  2O7 

work  must  be  passed  along  to  the  next  man,  and  the  next, 
until  the  job  is  complete.  All  great  things  are  accomplished 
by  the  cooperation  of  several  men,  and  little  can  be  accom- 
plished without  cooperation.  Any  system  to  ,be  successful 
must  have  cooperation,  and  must  be  such  that  if  this  is  not 
obtained  the  blame  can  be  definitely  fixed. 

In  the  system  outlined  this  is  accomplished;  the  duties  of 
each  man  are  definitely  fixed,  and  the  duties  of  the  man  who 
follows  cannot  be  accomplished  until  those  of  the  preceding 
man  have  been  satisfactorily  completed;  each  forces  the  other 
to  do  his  work,  and  if  this  is  not  done  the  fault  is  immedi- 
ately revealed. 


CHAPTER  XIV 

Organization  of  a  Smith  Shop,  a  Woodworking  Shop, 
AND  a  Canvas  and  Flag  Shop 

Methods  similar  to  those  used  in  the  machine  shop,  which 
are  described  in  Chapter  XIII,  have  been  employed  with  suc- 
cess in  a  blacksmith  shop,  woodworking  shop,  canvas  and  flag 
shop,  and  sheet  metal  shop.  While  the  general  principles 
which  govern  are  the  same  for  all  shops,  the  details  must  be 
made  to  suit  varying  conditions  which  exist  in  the  several 
shops.  The  organization  of  a  few  of  these  shops  and  the 
methods  followed  will  be  briefly  described. 

BLACKSMITH    SHOP. 

Very  little  attention  is  given  to  organization  or  methods 
in  commercial  jobbing  smith  shops,  yet  as  miich  can  be  ac- 
complished by  study  and  analysis  of  methods  in  these  shops 
as  has  been  accomplished  in  machine  shops. 

In  describing  the  organization  and  methods  of  the  smith 
shop,  I  wish  to  emphasize  that  the  improvements  made  are 
really  but  the  first  steps  towards  scientific  management,  and 
are  merely  the  introduction  of  a  systematic  and  logical 
method  of  handling  the  work  where  none  existed. 

Unfortunately'  the  same  conditions  exist  in  the  great  ma- 
jority of  the  jobbing  smith  shops  throughout  the  country. 
The  methods  employed  in  the  shop  under  consideration  are 
simple  and  can  be  used  in  any  shop,  and  in  the  great  ma- 
jority will  result  in  marked  improvement,  but  these  methods 
are  recommended  only  as  the  first  step  toward  scientific  man- 
agement. 

208 


ORGANIZATION    OF    VARIOUS    SHOPS 


209 


-  fnm  Circulating  Tank 


2 TO  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 


Fig.  28.    Smith  Shop,  Mare  Island  Navy  Yard,  north  wing.    Miscel- 
laneous  SMALL  WORK. 


Fig,  29.     Smith   Shop,  Mare  Island  Navy  Yard,   main  bay.     Medium 

size  work. 


ORGANIZATION   OF   VARIOUS   SHOPS 


2X1 


Fig.  30.    Smith  Shop,  Mare  Island  Navy  Yard,  south  wing.    Heavy 

forge  department. 


Fig.  31.     Smith  Shop,  Mare  Island  Navy  Yard.     Foreman's  Office. 
Work  board  on  the  right. 


212  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


ORGANIZATION    OF    VARIOUS    SHOPS  2I3 

GENERAL   ARRANGEMENT    OF    SHOP. 

The  general  arrangement  of  the  shop,  location  of  tools, 
cranes,  etc.,  are  shown  in  Figs.  2J,  28,  29  and  30. 

The  arrangement  of  the  office,  storeroom,  wash  room, 
lunch  room  and  water  closet  is  shown  in  Figs.  31  and  32. 
Very  few  smith  shops  are  provided  with  facilities  for  the 
comfort  of  the  workmen.  In  machine  shops  elaborate  wash- 
ing facilities  are  usually  provided  for  the  men,  while  in  black- 
smith shops,  where  more  needed,  they  are  seldom  found. 
In  the  arrangement  shown,  the  necessary  office  space,  lava- 
tory arrangements,  etc.,  are  provided  at  minimum  cost  in 
space. 

The  shop  organization  provides  for  the  following  sub-de- 
partments : 

1.  Miscellaneous  small  work. 

2.  Heavy  forge  work. 

3.  Bolt  machine  department. 

4.  Drop  forge  department. 

5.  Tool  dressing  and  tempering  department. 

The  forges,  furnaces,  hammers,  cranes  and  other  facilities 
are  grouped  as  far  as  possible  to  bring  the  work  of  each  of  the 
divisions  named  together. 

The  shop  is  entered  at  two  points  by  a  standard  gauge 
track,  and  all  heavy  material  is  handled  to  and  from  the  shop 
on  cars  served  by  the  shop  cranes.  The  railway  tracks  pass 
immediately  adjacent  to  the  east  end  of  the  north  wing  of  the 
shop,  from  which  all  light  material  is  shipped. 

Transportation  to  and  from  other  shops  and  the  store- 
house is  by  means  of  the  plant  railway  freight  service.  Trans- 
portation inside  of  the  shop  is  by  means  of  electric  jib  cranes, 
and  industrial  railway  tracks  which  serve  the  shop  and  the 
material  yard. 

The  duties  of  the  foremen  and  others,  and  the  routine  to 
be  followed,  are  defined  in  detail  written  instruction  issued  to 
the  shop,  and  in  tlie  description  which  follows,  these  instruc- 
tions are  freely  quoted. 


214  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

foreman's    RESPONSIBILITY    AND    DUTIES. 

The  foreman  is  held  directly  responsible  for  all  work  in 
his  department.  He  is  expected  to  maintain  the  highest  effi- 
ciency possible  in  his  organization.  Owing  to  his  superior 
mechanical  ability  he  is  expected  to  devise  schemes  and  meth- 
ods equal,  and,  if  possible,  superior  to  those  in  other  large 
plants  handling  similar  work.  He  will  make  a  study  of  the 
special  ability  of  each  individual  mechanic. 

He  will  in  person  receive  all  orders  for  work  to  be  exe- 
cuted in  his  department.  Upon  receipt  of  job  orders  or  shop 
orders,  he  will  go  over  each  and  designate  to  whom  the  work 
shall  be  assigned,  giving  the  necessary  instructions,  and  note 
particularly  any  peculiarity  or  unusual  conditions  regarding 
the  work,  furnishing  the  data  necessary  for  the  route  man  to 
make  out  the  instruction  cards  intelligently. 

He  will  utilize  any  special  tools  on  hand  that  can  be  used 
to  advantage,  and  if  none  are  available  and  he  considers  it 
desirable  to  make  such  tools  for  a  job,  he  will  request  the  nec- 
essary authority  from  the  shop  superintendent. 

In  other  words,  the  foreman  will  give  each  job  order  his 
personal  attention  and  study,  assuring  himself  that  all  details 
have  been  arranged  to  enable  the  work  to  be  completed  ex- 
peditiously and  economically. 

These  instructions  are  not  to  be  construed  to  make  an  office 
clerk  of  the  foreman.  It  is  intended  that  every  job  to  be  ac- 
complished shall  be  analyzed  and  planned  by  the  foreman  be- 
fore being  undertaken  in  order  that  each  may  receive  the  bene- 
fit of  his  experience  and  knowledge. 

In  carrying  out  these  duties  the  foreman  will  have  the 
assistance  of  two  assistant  foremen  on  the  floor  of  the  shop, 
one  in  charge  of  all  small  work  in  the  north  end  of  the  shop, 
and  the  other  in  charge  of  the  heavy  work,  the  bolt  machines 
and  the  tool  department  in  the  south  end  of  the  shop.  He 
will  also  be  assisted  by  a  route  man,  an  office  clerk,  a  ma- 
terial and  move  man,  and  messenger  boy.  The  duties  of  the 
various  assistants  to  the  foreman  are  as  follows : 


ORGANIZATION    OF    VARIOUS    SHOPS  21 5 

Assistant  Foremen.  Each  assistant  foreman  is  responsible 
to,  the  foreman  for  all  work  performed  in  his  division.  It 
is  his  duty  to  see  that  each  workman  properly  understands 
the  work  assigned  to  him,  and  he  will  supply  the  workmen 
with  all  information  necessary  to  carry  out  the  directions 
given  on  the  instruction  cards.  He  will  see  that  each  work- 
man has  at  least  one  job  ahead  with  the  necessary  stock  at 
the  forge  and  with  the  necessary  templates,  sketches,  or 
plans,  in  order  that  the  work  may  be  immediately  taken  up 
when  the  job  in  hand  is  completed. 

When  a  new  instruction  card  is  issued,  it  is  the  duty  of 
the  assistant  foreman  to  decide  upon  the  detail  methods  to  be 
followed  to  carry  out  the  instructions,  and  the  proper  size 
and  amount  of  material  required. 

In  ordering  stock  the  assistant  will  use  an  order  slip, 
giving  the  size  and  amount  of  stock  required,  the  job  order 
number,  and  the  forge  at  which  the  material  should  be 
placed.  This  slip  will  be  dated  and  signed  by  the  assistant 
foreman  and  will  be  given  to  the  material  and  move  man. 
If,  in  any  case,  he  is  in  doubt,  the  foreman  will  be  immedi- 
ately consulted. 

The  assistant  will  inspect  all  finished  work  before  it  leaves 
the  forge,  and  will  attach  a  tag  giving  the  necessary  informa- 
tion to  enable  the  move  man  to  move  the  work  to  its  proper 
place. 

Route  Man.  The  route  man  will  carry  out  the  details  of 
routing  the  work  from  the  data  contained  in  the  job  order  or 
shop  order,  and  the  instructions  received  from  the  foreman. 
He  will  make  out  and  issue  the  instruction  cards  and  make 
out  the  standing-order  cards  for  the  same.  He  will  keep  the 
route  board  in  the  foreman's  ofBce  to  conform  to  the  exact 
condition  of  the  work  in  the  shop.- 

He  will  keep  the  order  file  up  to  date,  filing  promptly  or- 
ders that  have  been  routed  and  removing  orders  that  have 
been  completed.  He  will  keep  the  "  tickler  "  file  for  prom- 
ises made  to  other  shops,  or  promises  made  by  other  shops. 
The  route  man  will  make  sketches  when  necessary,  to  issue 


2l6  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 

with  the  instruction  cards.  He  will  index  and  file  all  plans 
received  in  the  shop. 

Office  Clerk.  The  office  clerk  will  keep  the  records  of  the 
men,  attend  to  the  time  cards,  check  the  records  of  time  given 
on  the  instruction  cards  and  file  the  same.  He  will  make 
out  requisitions  for  material  from  the  storehouse  as  called 
for  on  the  order  slips  furnished  by  the  material  and  move 
man.  He  will  keep  the  "  orders  to  foremen  "  files  up  to  date 
and  perform  all  clerical  work  required  in  connection  with  the 
work  of  the  shop. 

Material  and  Move  Man.  The  material  and  move  man 
will  keep  an  accurate  record  on  the  stock  cards  of  the  ma- 
terial on  hand.  He  will  see  that  all  requests  from  the 
assistant  foremen  for  material  are  immediately  supplied  ex- 
actly as  called  for  and  that  it  is  delivered  to  the  forge  speci- 
fied on  the  order  slip.  The  order  slips  will  be  turned  over  to 
the  office  clerk  daily.  He  will  keep  a  record  of  the  fire 
bricks  used  by  each  forge  and  furnace;  he  will  record  the 
oil  meter  readings;  he  will  remove  finished  work  from  the 
forge  to  the  station  specified  on  the  tag  attached  to  the  work. 
A  laborer  will  be  assigned  to  him  as  an  assistant,  and  when 
he  requires  additional  labor  to  handle  heavy  stock  the  assistant 
foreman  will  supply  the  necessary  men. 

OPERATION    OF    THE    SYSTEM. 

All  work  is  ordered  either  by  job  order  or  shop  order 
from  another  shop.  The  issue  of  these  orders  has  been 
fully  described  in  preceding  chapters.  As  the  greater  part 
of  the  work  consists  of  repairs  where  the  smith  work  is  only 
a  small  part  of  the  job,  the  greater  portion  of  the  work  in 
the  smith  shop  is  on  shop  orders  from  other  shops. 

The  shop  orders  and  job  orders  go  direct  to  the  foreman, 
who  studies  each  order  and  notes  on  the  back  of  the  order 
such  instructions  as  he  thinks  necessary.  He  also  assigns 
the  work,  which  he  is  able  to  do,  for  the  work  board  in 
his  office  shows  the  work  assigned  to  each  forge  or  furnace. 

The  orders  then  go  to  the  route  man,  who  makes  out  the 


ORGANIZATION    OF    VARIOUS    SHOPS 


217 


instruction  cards,,  which  are  to  go  to  the  workmen,  and  the 
standing-order  slips,  which  are  to  go  to  the  work  board  in 
the  foreman's  office. 

The  instruction  card  is  shown  in  Fig.  33,  and  is  self- 
explanatory.  At  each  forge  or  furnace  there  is  a  holder  for 
three  cards  as  previously  described  for  the  machine  shop. 
Each   workman   in   charge   of   a   gang  records   on   the   card 


CHECK   No. 

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ARTICLE 

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Fig.  Z2>-    Instruction   Card,   smith   shop. 


the  time  each  man  of  the  gang  works  on  the  job.  For  each 
instruction  card  there  is  a  corresponding  standing-order  slip 
which  contains  a  brief  of  the  job,  the  job  number,  and  the 
forge  or  furnace  to  which  the  work  is  assigned.  These  are 
placed  on  the  work  board. 

The  work  board,  Fig.  34,  is  divided  for  the  forges  and 
furnaces,  and  has  the  check  numbers  of  men  in  charge  of 
gangs  above  the  hooks  on  which  the  standing-order  slips 
hang.  The  board  is  also  provided  with  file  cases  for  active 
and  inactive  orders,  and  pigeon  holes  for  prepared  instruc- 
tion cards  which  are  not  yet  assigned,  and  files  for  com- 
pleted instruction  cards. 


2l8 


COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 


I    I    I    I    I    I  1    ll  . 


I     IIPBI  III 

II  III   iiii> 


III  ill 


I 


u. 


ORGANIZATION    OF    VARIOUS    SHOPS  219 

When  there  are  already  three  jobs  at  a  forge,  the  in- 
struction card  with  the  standing-order  sHp  pinned  to  it  is 
placed  in  a  pigeon  hole  under  the  proper  heading.  The 
foreman  can  determine  from  the  work  board  the  condition 
of  the  work  in  the  shop.  He  can  see  the  location  of  each 
job  and  the  amount  of  work  in  the  shop  not  yet  assigned 
to  a  forge.  From  this  inspection  and  consultation  with  his 
tickler  file  of  promises  he  can  learn  whether  he  should  take 
on  additional  men  or  change  some  of  the  assignments  al- 
ready made  to  give  preference  to  work  required  at  an  early 
date. 

The  assistant  foreman  in  charge  of  a  division  begins  the 
assembly  of  tools,  drawings  and  material,  as  soon  as  a  new 
instruction  card  is  issued.  He  makes  out  a  material  slip 
for  the  material  required  and  gives  this  to  the  material  man. 
H  the  material  is  on  hand  in  the  shop  stock  it  is  drawn,  and 
if  not  the  office  clerk  is  notified  and  it  is  ordered  from  the 
main  store. 

When  a  job  is  completed  the  man  in  charge  of  the  gang, 
after  entering  the  time  of  the  gang,  removes  the  card  from 
the  holder  and  hangs  it  on  a  hook  provided  and  moves  up 
his  next  card  and  starts  his  job. 

The  assistant  foreman  inspects  the  completed  job,  initials 
the  instruction  card,  and  attaches  to  the  work  a  tag  bearing 
his  inspection  mark  and  designating  the  place  to  which  the 
work  will  be  moved. 

The  material  man  moves  the  work  and  takes  the  instruc- 
tion card  to  the  office  and  places  it  in  the  basket  provided  on 
the  desk  of  the  route  man. 

The  route  man  removes  the  standing-order  slip  from  the 
work  board  and  the  order  for  the  work  from  the  file,  pins 
the  latter  to  the  instruction  card  and  places  the  two  in  a 
basket  provided  on  the  desk  of  the  foreman.  The  foreman 
will  close  the  job,  returning  the  order  with  the  date  of  com- 
pletion marked. 

The  costs  of  direct  labor  as  shown  by  the  instruction  cards 
will  be   scrutinized   and   compared   with   previous   costs,   and 


220 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


then  will  be  indexed  and  filed.  The  shop  superintendent 
goes  over  these  records  frequently  and  picks  out  and  has 
recorded  such  as  can  be  used  as  standard  costs. 

In  addition  to  the  detail  record  of  time  kept  on  each  job 
on  the  instruction  cards,  each  man  makes  out  his  own  time 
card  for  each  job  on  which  he  works  each  day.  These  time 
slips  go  to  the  accounting  department  in  the  main  office  and 
from  them  the  pay  roll  is  made  up.  They  are  also  posted 
under  each  shop  to  the  job  number  and  it  is  from  this  record 


Fig.  35.    Racks  for  storage  of  material  and  tools. 


that  the  total  cost,  including,  usually  work  in  a  number 
of  shops,  is  obtained.  It  will  thus  be  seen  that  there  is 
some  duplication  in  the  records.  This  duplication  pays  for 
itself  many  times  over,  as  it  enables  detail  costs  of  each 
operation  to  be  obtained,  and  it  enables  the  foreman  and 
shop  superintendent  to  obtain,  immediately  a  job  is  com- 
pleted, the  direct  cost  of  each  operation. 

A  reasonable  supply  of  ordinary  material  is  maintained 
in  the  shop  store.  In  Fig.  35  the  racks  for  the  storage  of 
bar  material  are  shown.     The  main  supply  of  material,  how- 


ORGANIZATION    OF    VARIOUS    SHOPS 


221 


MFG.   DEPT.    NO.   703. 

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Fig.  36.     Stock  Card  for  smith  shop  store. 


222 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


ever,  is  the  general  storehouse,  which  is  drawn  on   for  ma- 
terial not  in  the  shop  store  and  for  replenishing  the  latter. 

An  accurate  record  is  kept  of  all  material  in  the  shop 
store  on  a  stock  card,  Fig.  2)^,  which  shows  receipts  and 
issues,  and  on  the  inventory  cards.  Fig.  37,  which  are  self- 
explanatory. 


MFO.OEPT.  616 


Maximum 


J ^^00 umxuU    rooo. 


Fig.  z7-    Inventory  Card  for  smith  shop  store. 

The  absence  of  smoke  and  soot,  which  are  usually  as- 
sociated with  a  smith  shop,  will  no  doubt  be  noticed  in  the 
illustrations.  This  is  due  to  the  use  of  oil  fuel,  not  only 
for  the  furnaces,  but  also  for  open  forges.  This  is  the 
first  shop  in  the  world  to  use  oil  exclusively. 


ORGANIZATION    OF   A    LARGE   WOOD-WORKING   SHOP. 

The  joiner  work  at  a  large  navy  yard  comprises  not  only 
the  usual  work  in  the  shop,  but  also  work  on  ships  and 
work  in  buildings.  The  greater  part  of  the  work  outside 
of  the  shop  is  on  ships.  Practically  all  of  this  is  special, 
and,  due  to  the  small  openings  through  which  the  work 
must  be  carried  for  installation,  it  must  be  erected  in  small 
sections,  necessitating  more  work  than  would  otherwise  be 
required.  Very  little  ship  work  is  what  might  be  called 
rectangular,  nearly  all  is  beveled  on  account  of  the  sheer 
and  crown  of  the  decks.  This  makes  the  work  costly,  not 
only  in  the  shop  but  also  in  erection,  as  much  hand  work  is 
involved. 


ORGANIZATION    OF    VARIOUS    SHOPS  223 

Before  the  organization  was  improved  much  time  was  lost 
by  workmen  going  to  and  from  the  shop.  At  a  navy  yard, 
ships  are  often  berthed  at  considerable  distances  from  the 
shop  and  much  time  may  be  lost  by  men  going  from  the  ships 
to  the  shop.  With  the  ordinary  workman  there  is  little  look- 
ing ahead,  and  it  is  more  often  the  case  than  otherwise  that 
he  only  sees  that  he  requires  shop  work  when  he  gets  to  the 
point  where  he  must  stop  until  this  work  is  obtained ;  he  then 
goes  to  the  shop  to  make  known  his  needs  and  wait  for  the 
work,  or  perhaps  to  hunt  up  the  material  and  do  the  neces- 
sary machine  work  himself. 

This  may  •  seem  an  exaggerated  case,  but,  unfortunately 
such  cases  were  of  frequent  occurrence  before  the  work  was 
systematized.  Each  man  planned  his  own  work,  and  he  also 
wished  to  do  it  all,  including  selecting  and  machining  the 
material  and  erecting  it  on  the  ship,  and  even  carrying  it  to 
the  ship  on  a  push  cart,  assisted  by  the  men  who  worked 
with  him.  The  work  was  rarely  planned  before  being  under- 
taken, and  nothing  was  provided  until  its  necessity  stopped 
the  work  until  obtained. 

An  organization  is  required  which  secures  cooperation  be- 
tween the  outside  and  shop  forces.  If  this  is  not  obtained 
there  will  be  large  losses  due  to  the  outside  force  not  receiving 
the  shop  work  in  the  proper  order  and  at  the  proper  times, 
or  to  the  outside  force  doing  work  by  hand  which  should 
be  done  in  the  shop. 

The  organization  which  was  developed  provides: 

1.  Careful  analysis  of  the  work  to  be  accomplished. 

2.  Division  of  the  work  into  natural  elements.     Written  instruc- 

tions of  the  work  required ;  each  class  of  work  to  be  done 
by  men  specially  trained  for  this  class. 

3.  Collection  of  drawings  and  information  required  by  each  divi- 

sion to  enable  it  to  accomplish  its  work. 

4.  Collection  of  the  material   required   and  its   delivery  to  the 

proper  division  at  the  right  time. 

5.  Assembly  of  the  finished  material  and  delivery  to  the  outside 

force  when  needed. 


224 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


The  force  naturally  divides  itself  into  three  general  groups, 
viz. :  ship  work,  buildings,  and  shop  work,  with  an  assistant 
foreman  in  charge  of  each  division. 

All  material  for  the  two  outside  divisions,  whether  rough 
or  dressed  lumber,  finished  furniture,  hardware,  or  other 
material,  is  obtained  through  the  shop  and  furnished  where 
required.  The  workmen  are  not  allowed  to  go  to  the  shop 
for  this  material. 


SHOP    WORK. 


The  shop  itself  is  well  equipped,  as  can  be  seen  from  the 
illustration,  Fig.  38.     The  building  is  well  lighted  and  ven- 


Upper  Floor  of  joiner  shop,  Mare  Island  Navy  Yard. 


tilated  and  equipped  with  an  efficient  dust-collecting  system. 
Excellent  wash  and  toilet  rooms  are  provided.  The  ma- 
chinery is  modern  and  is  driven  by  individual  motors,  obviat- 
ing the  usual  mass  of  belting  and  shafting.  In  fact,  every 
physical  condition  is  met  for  good  work  at  low  cost. 

The  work  naturally  divides  itself  into  the   following  five 
divisions : 


ORGANIZATION    OF    VARIOUS    SHOPS  225 

(a)  Rough   Machine   Division,  comprising  heavy  band   sawing, 

re-sawing,  planing,  and  matched  material  and  molding  in 
quantities.  This  division  takes  in  the  lower  floor  of  the 
joiner  shop  and  the  saw  mill.  The  greater  part  of  the  ma- 
terial manufactured  in  this  division  does  not  go  to  the 
finished  machine  division  on  the  upper  floor  of  the  joiner 
shop,  but  is  generally  the  product  of  a  saw  mill  and  plan- 
ing mill,  and  is  finished  material  when  it  leaves  this  divi- 
sion. 

(b)  Finished  Machine  Division,  comprising  work  done  on  the 

upper  floor,  as  light  re-sawing,  rip  sawing,  dove-tailing, 
mortising,  tenoning,  shaper  work,  light  planer  work,  etc. 

(c)  Carpenter  Division. 

(d)  Joiner  Division. 

(e)  Cabinet-making  Division. 

The  last  three  divisions  cover  bench  work  and  minor  in- 
cidental machine  work,  and  the  limits  of  the  work  of  each 
division  are  shown  by  the  designations.  While  it  is  de- 
sirable that  the  great  mass  of  the  machine  work  should  be 
done  by  expert  machine  hands  and  not  by  the  bench  men,  if 
the  bench  men  are  prohibited  from  using  the  machine  tools 
excessive  hand  work  will  result.  Rip  and  cut-ofif  saws,  band 
saws  and  jointers  are  conveniently  placed  to  the  benches  and 
the  bench  men  are  allowed  and  required  to  operate  these  as 
necessary,  but  supervision  is  exercised  to  check  any  tendency 
of  the  bench  hands  to  do  work  which  should  be  done  by  the 
machine  division. 

All  job  orders  and  shop  orders  for  work  go  to  the  fore- 
man's desk  and  he  gives  each  his  personal  attention.  He 
notes  on  the  back  of  each,  in  a  form  provided,  the  assistant 
to  whom  the  work  is  assigned,  the  kind  and  quality  of  ma- 
terial to  be  used,  and  any  special  instructions  or  information 
which  he  deems  necessary  to  enable  the  job  to  be  carried 
through  expeditiously  and  economically. 

The  order  then  goes  to  the  route  man,  who  makes  the  in- 
struction cards.  For  outside  work  these  go  to  the  designated 
outside  assistant,  who  investigates  the  job,  orders  the  ma- 
terial, makes  orders  on  the  shop  for  necessary  machine  work, 
and  details  the  outside  man  for  the  job,  entering  a  standing- 


226 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


order  slip  and  placing  it  on  the  work  board  under  the  man's 
check  number. 

For  shop  work  the  route  man  makes  out  the  instruction 
cards,  which  are  similar  to  those  described  for  the  smith 
shop,  and  orders  material  not  carried  in  the  shop  store.  The 
instruction  cards  go  to  the  gang  boss  on  the  shop  floor. 
From  his  knowledge  of  the  work  and  an  inspection  of  the 


J.  O.  No. 
Check  No. 


Machine  Division. 
Sections 


Date 


Rough  Machg. 


Barge  Lumber 


Mouldings 


Dressing 


No. 

2 

Turning 

No. 
3 

Resaw 

No. 
4 

Tenoning 

Cutoff 
Planing 

Mortising 

Boring 

Jointing 

Shaper 


Scroll  Saw 


Panel  Mach 


Sticker 


Sander 


Doveth 


Section 


Forw'd  to 


Fig.  39. 

work  board,  which  shows  the  assignment  of  every  job  or- 
dered, he  can  tell  where  the  new  work  can  best  be  placed. 
He  assigns  the  joiner  who  is  to  lead  on  the  job  and  such 
men  as  are  necessary  to  assist  him.  The  man  who  is  to  lead 
gets  the  original  instruction  card,  while  those  who  are  to 
assist  get  cards  giving  the  charge  number  and  the  name  of 
the  man  leading  on  the  job. 

The  leading-man  on  a  job,  when  he  receives  a  new  instruc- 
tion card,  lays  out  the  work  and  orders  the  necessary  ma- 
chine work  on  a  machine  card,  Fig.  39.  After  filling  out 
this  card  he  hangs  it  on  a  hook  on  his  board  and  it  is  taken 


ORGANIZATION    OF    VARIOUS    SHOPS  22/ 

Up  by  the  material  man,  who  obtains  from  the  route  man 
copies  of  the  orders  for  material  and  receives  and  checks 
this  material.  He  also  obtains  from  the  shop  store  all  minor 
material  needed.  When  the  rough  material  is  received  it  is 
rough  machined  and  sent  to  the  bench  for  laying  off,  and 
then  delivered  to  the  various  special  machine  men  for  such 
operations  as  dove-tailing,  turning,  shaping,  mortising,  etc. 
The  machine  card  shows  the  sequence  of  these  operations 
and  follows  the  material  through  the  shop  until  it  is  re- 
turned to  the  bench  ready  for  assembling. 

The  work  board,  tickler  files,  instruction-card  holders, 
storeroom  methods,  methods  of  transportation,  etc.,  are  the 
same  as  those  previously  described  for  other  shops. 

In  work  which  is  repeated,  detail  records  are  kept  of  the 
time  and  cost  of  the  various  operations,  and  these  are  care- 
fully analyzed  and  studied  to  determine  where  cost  can  be 
reduced.  Since  the  adoption  of  the  system  outlined,  large 
reductions  have  been  made  in  costs.  In  work  that  is  repeated 
the  costs  have  in  nearly  all  cases  been  cut  in  half,  while  in 
some  cases  the  reduction  has  been  even  greater. 

ORGANIZATION    OF    CANVAS   SHOP   AND    FLAG   SHOP. 

In  these  shops,  as  elsewhere,  no  attempt  had  previously 
been  made  to  separate  the  work  into  elements  and  to  give 
each  part  to  those  best  qualified  for  that  class  of  work. 
For  example,  in  making  an  intricate  foreign  fiag  the  whole 
job  was  assigned  to  one  worker  who  laid  out  the  design, 
did  the  cutting,  basting,  stitching,  embroidering,  heading, 
pressing  and  folding. 

Under  the  new  system  the  work  is  distributed  to  the  fol- 
lowing named  sections :  Marking,  cutting,  basting,  machining, 
heading  and  pressing.  The  division  of  the  shop  in  sections, 
and  the  general  arrangements,  are  shown  in  the  illustrations, 
Figs.  40,  41  and  42.  To  each  section  is  assigned  the  workers 
best  qualified  for  each  class  of  work. 

In  the  canvas  shop  the  conditions  were  the  same  as  those 
described  for  the  flag  shop,  and  similar  changes  were  made 


228  COST    KEEPING   AND    SCIENTIFIC    MANAGEMENT 


Fig.  40.     Flag  Shop.     Design,  marking  and  cutting  departments. 
Note  instruction  cards  for  each  worker. 


11 

^-^  0IP^^^^Km^| 

1                    a.  11 

' 

Fig.  41.     Flag    Shop.     Basting    and    machine    departments.     All    ma- 
chines  ARE    motor  driven. 


ORGANIZATION    OF   VARIOUS    SHOPS 


229 


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Fig.  42.    Flag  Shop,    inspection  table.    Work  board  on  the  left. 

in  organization.     In  this  shop  the  work  is  distributed  among 
four  departments,  as  follows : 

(i)  Laying  Out  and  Cutting.  This  work  is  done  under  the 
immediate  supervision  of  the  foreman.  One  man  does  practically 
all  laying  out,  cutting  and  the  preparation  of  material  before  it 
goes  to  the  operators. 

(2)  Machine  Department.  This  includes  all  stitching  where  it 
is  possible  to  use  a  machine. 

(3)  Finishers.  Includes  all  finishing  on  the  work  which  has 
passed  through  the  machines,  such  as  hand  stitching,  roping, 
working  eyelets,  grommets,  rings,  etc. 

(4)  Hand  Workers.  Includes  all  hand  work  where  no  part 
of  the  work  is  done  by  machine. 


ROUTING    WORK, 

All  work  is  carefully  planned  and  routed,  and  written  in- 
struction cards  issued.  All  material  necessary  for  a  job 
is  assembled  before  the  work  is  undertaken,  and  is  delivered 
to  the  proper  section  at  the  right  time.  The  work  board, 
material  order  sheets,  instruction-card  holders,  etc.,  are  the 
same  as  those  previously  described.  The  route  sheet  differs 
from  that  used  in  other  shops  and  previously  described.  A 
great  deal  of  the  output  is  duplicate  manufacture  work,  and 


230 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


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ORGANIZATION  OF  VARIOUS  SHOPS  23 1 

it  is  desirable  to  have  accurate  record  of  the  times  taken 
on  the  various  operations,  and  also  the  direct  cost,  in  such 
shape  that  comparisons  can  readily  be  made  of  the  work 
accomplished.  The  route  sheet,  Fig.  43,  is  an  envelope,  on 
the  front  of  which  in  appropriate  columns  the  order  is  re- 
corded, the  operations  are  defined,  and  the  assignment  of 
the  work  made.  When  the  work  is  completed  the  dates  of 
completion  are  entered  and  also  the  time  taken  for  each 
operation  and  the  total  direct  cost  of  the  job.  This  envelope 
forms  an  excellent  pocket  for  filing  the  completed  instruc- 
tion cards,  bills  of  material,  and  other  data  regarding  the 
job,  the  condensed  information  being  given  on  the  outside. 

The  instruction  card  contains  a  description  of  the  work 
required  and  has  blanks  in  which  the  workman  enters  his 
time  each  day  until  the  job  is  completed.  After  the  work 
has  been  inspected,  the  time  and  direct  cost  records  are  com- 
piled from  these  cards  and  entered  on  the  route  sheet  en- 
velope and  the  cards  are  filed  in  the  envelope. 

Owing  to  changes  made  in  organization  and  methods  in 
these  two  shops  the  output  for  each  worker  has  been  greatly 
increased.  With  the  same  quantity  of  work  only  half  the 
number  of  workers  previously  employed  are  required.  In 
the  following  chapter  there  will  be  given  data  of  reductions 
made  in  cost  due  to  the  better  methods  employed. 


CHAPTER  XV 

Reductions  in  Costs  Due  to  Scientific  Methods 

The  Mare  Island  Navy  Yard  labors  under  the  disadvan- 
tage of  a  limited  supply  of  skilled  mechanics  and  high  daily 
wages.  First  class  mechanics  at  this  yard  receive  from  52 
to  63  cents  an  hour,  while  helpers  and  laborers  receive  30 
to  ^^  cents  an  hour.  It  would  seem  that  the  high  cost 
of  labor  would  have  brought  forth  the  best  efforts  to  secure 
scientific  management.  Such,  however,  was  not  the  case ; 
the  very  fact  that  labor  wages  are  high  brought  about  the 
assumption  that  Mare  Island  could  not  compete  with  other 
navy  yards.  When  high  costs  were  reported  conditions  were 
not  investigated,  as  it  was  assumed  that  the  high  cost  was 
due  to  the  high  wages. 

In  the  past  few  years  the  general  principles  of  Scientific 
Management  have  been  followed,  and  there  has  been  a  re- 
markable increase  in  output  and  reduction  in  cost.  It  is 
entirely  due  to  the  adherence  to  these  principles  that  this  es- 
tablishment has  been  able  to  compete  with  Eastern  navy  yards 
where  wages  are  much  lower  and  the  cost  of  material  is  less. 
It  will  not  be  possible  to  give  the  numerous  cases  where 
marked  reductions  in  cost  have  been  made,  but  a  few  ex- 
amples will  be  given  to  illustrate  general  conditions : 

shipbuilding. 

Shipbuilding  comprises  work  in  a  large  number  of  shops, 
foundry,  machine  shops,  pattern  shop,  shipfitters'  shop,  joiner 
shop,  electrical  shop,  coppersmith  shop,  sheet  metal  shop,  etc. 

A  large  collier  450  feet  long  was  built  at  the  Mare  Island 
yard,  and  a  sister  ship  was  at  the  same  time  built  at  a  large 
Eastern  navy  yard.  The  two  ships  are  identical,  being  built 
from  the  same  detail  plans.     The  wages  at  Mare  Island  are 

232 


REDUCTIONS    IN    COSTS    DUE    TO    SCIENTIFIC    METHODS        233 

approximately  25  per  cent,  greater  than  those  of  the  Eastern 
yard;  the  structural  material  for  the  Pacific  coast  built  ship 
was  necessarily  obtained  from  the  East  and  owing  to  trans- 
portation charges  the  cost  was  at  least  25  per  cent,  greater 
than  on  the  East  coast.  The  cost  of  the  ship  built  in  the 
Eastern  yard  should  therefore  be  approximately  25  per  cent, 
less  than  the  Western  built  ship,  yet  the  Pacific  coast  yard, 
employing  some  of  the  fundamental  principles  of  scientific 
management,  built  the  ship  for  $100,000  less  than  the  Eastern 
yard. 

BOAT    BUILDING. 

A  large  number  of  small  boats  are  each  year  built  in  the 
navy  yards.  As  the  boats  are  of  standard  design  a  direct 
comparison  of  costs  can  be  obtained,  and  the  amount  saved 
on  new  boats  by  improved  methods  can  be  determined.  At 
the  Mare  Island  yard  in  two  years'  time  the  application  of 
scientific  methods  of  management  reduced  the  cost  of  boats 
to  approximately  one-half  previous  costs  and  on  the  output 
of  new  boats  in  two  years  there  was  a  saving  on  previous 
costs  of  over  $25,000.  In  addition  to  the  new  work  there  is 
a  large  amount  of  repair  work  in  this  shop  and  the  improved 
methods  have  greatly  decreased  the  cost  of  this  work,  but  the 
savings  effected  on  repair  work  cannot  be  determined. 

WOOD    CALKING. 

Practically  all  of  the  wood  calkers  on  the  Pacific  coast 
belong  to  an  association.  This  association  is  very  powerful 
and  very  few  care  to  antagonize  it.  The  number  of  ap- 
prentices is  limited  and  the  output  of  the  men  is  limited. 
Wages  are  very  high,  $5  and  $6  a  day  being  the  prevailing 
wages.  The  calkers  at  the  navy  yard  received  $5  a  day  and 
they  seldom  ever  reached  in  output  the  limits  set.  I  was 
satisfied  that  the  output  was  far  too  low,  but  for  a  long  time 
was  unable  to  increase  it. 

Finally,  after  educating  some  men  who  could  take  the 
places  of  the  calkers  in  case  of  trouble,  and  carefully  ascer- 


234  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

taining  the  amount  that  a  first-class  man  should  do,  I  fixed 
a  piece-work  price  which  would  allow  the  men  to  make  from 
50  to  60  per  cent,  more  than  their  day's  wages  and  put  all 
work  on  piece  work. 

To  enable  these  men  to  earn  the  60  per  cent,  above  day 
wages,  it  was  necessary  for  them  to  do  three  and  a  half  or 
four  times  as  much  as  was  accomplished  at  day  work.  The 
situation  was  accepted,  and  in  a  few  weeks  the  men  were 
actually  doing  from  three  to  four  times  as  much  as  was  done 
before. 

It  is  now  necessary,  on  account  of  the  large  output,  to 
employ  but  a  small  number  of  men,  and  these  are  the  very  best 
of  their  class.  They  make  large  wages,  are  perfectly  con- 
tented, and  never  give  the  management  the  slightest  trouble. 

The  output  now  obtained  is  far  above  that  obtained  in  other 
establishments  in  the  vicinity,  and  I  believe  exceeds  the  out- 
put obtained  in  Eastern  establishments.  The  average  output 
for  representative  classes  of  work  is  as  follows: 

Neiv  Work: 

Decks,  three  threads 380  feet  in  8  hours. 

Sides  and  bottom,  four  threads 265   feet  in  8  hours. 

Old  Work: 
Reave  out  putty,  harden   down,   and   calk 

one  thread    425  feet  in  8  hours. 

Reave   out   glue,    harden    down,    and    calk 

one   thread    380  feet  in  8  hours. 

BOILER   SHOP. 

Conditions  were  known  to  be  very  bad  in  this  shop.  The 
foreman  was  not  in  sympathy  with  any  changes  and  resisted 
efforts  made  to  improve  efficiency.  The  aim  appeared  to  be 
to  employ  as  many  high-priced  boilermakers  as  possible,  re- 
gardless of  expense.  Under  these  conditions  every  change 
had  to  be  considered  with  the  greatest  care  before  being  put 
into  effect. 

An  assistant  who  had  considerable  experience  in  handling 
men,   and  who  was  endowed  with  much  patience   and  tact, 


REDUCTIONS    IN    COSTS    DUE    TO    SCIENTIFIC    METHODS        235 

was  put  in  the  shop.  This  assistant  was  my  representative 
in  the  shop  and  was  given  full  authority  to  make  changes. 
He  was  directed  to  fully  study  the  situation  before  making 
his  first  change  and  to  consult  me  daily  regarding  proposed 
measures. 

It  was  decided  to  take  one  job,  the  retubing  of  three  water- 
tube  boilers  of  the  small  tube  type,  and  show  what  could 
be  done  by  improving  methods.  In  other  words  it  was  con- 
sidered necessary  to  make  a  demonstration  that  everyone 
could  see  before  beginning  a  complete  reorganization  of  the 
shop.     The  results  obtained  were  far  beyond  expectations. 

A  full  description  of  the  conditions  found  and  the  changes 
made  cannot  be  given  here.  Generally,  the  operations  were 
made  to  follow  each  other  in  logical  order,  the  tubes  coming 
in  the  door  and  going  from  operator  to  operator  until  they 
reached  the  boiler.  Proper  tools  and  equipment  were  sup- 
plied, machine  work  replaced  hand  work,  helpers  and  boys 
replaced  boilermakers  for  the  inferior  work,  each  man's 
work  was  carefully  planned  and  a  definite  assignment  of  work 
made,  daily  records  were  kept  of  the  exact  amount  of  work 
accomplished  by  each  man,  and  all  waits  were  eliminated. 
No  attempt  was  made  to  drive  the  men,  but  the  operations 
were  so  arranged  that  the  work  shoved  the  men ;  each  opera- 
tion had  to  keep  ahead  of  the  operation  behind,  and  if  this 
was  not  the  case  it  immediately  showed  up. 

A  detail  record  of  the  time  and  cost  of  each  operation  was 
made.  These  records  are  of  much  interest,  particularly  as 
some  of  them  showed  such  tremendous  reductions  in  cost 
that  they  have  been  questioned.  The  man  who  has  been 
outdistanced  always  questions  the  record  of  the  man  who 
has  defeated  him.  One  operation,  the  cutting  out  of  the  old 
tubes,  has  caused  considerable  comment.  There  were  4,600 
—  I  ^ -inch  and  i34-iiT^ch,  No.  11,  B.  W.  G.  tubes  in  the  three 
boilers ;  two  cuts  are  required  to  remove  the  tubes,  one  at  the 
top  drum  and  one  at  the  lower  drum.  Six  expert  chippers, 
working  in  pairs,  cut  out  the  tubes,  and  to  each  pair  there 
was  a  helper  to  remove  the  tubes.     The  4,600  tubes  were  cut 


236  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

out,  removed  from  the  boiler,  and  piled  by  these  men  in  7J/^ 
hours.     This  was  at  day  work;  not  piece  zvork! 

The  other  operations  show  equally  as  satisfactory  results. 
The  time  taken  previously  to  retube  three  boilers  in  the  shop 
was  from  80  to  90  days,  and  the  direct  labor  cost  was  about 
$1,100  per  boiler.  The  time  taken  under  the  changed  con- 
ditions was  15  days  and  the  direct  labor  cost  was  a  little  over 
$400  per  boiler. 

MACHINE    SHOP. 

In  the  machine  shop  by  far  the  greater  part  of  the  work 
is  repair  work  and  comparisons  showing  the  improvement 
cannot  be  made.  In  the  manufacture  of  fittings,  such  as  hose 
valves,  air  ports,  boat  castings,  deck  light  fittings,  etc.,  the 
costs  were  greatly  reduced  and  in  many  cases  were  less  than 
half  previous  costs.  In  the  manufacture  of  steam  winches, 
the  cost  was  less  than  the  cost  of  the  same  winches  in  Eastern 
yards.  Not  only  did  the  better  methods  reduce  the  cost,  but 
they  greatly  reduced  the  time  required  to  do  work,  and  this 
is  important  in  a  navy  yard,  which  will  be  called  on  in  time 
of  war  to  make  repairs  to  the  fleet. 

CANVAS   WORK. 

In  the  reorganization  of  the  sail  loft  no  attempt  was  made 
to  drive  the  men.  In  no  case  were  the  men  told  that  the 
output  was  small,  or  that  it  should  be  increased,  and  only  in 
one  case  was  there  an  intimation  that  the  management  was 
not  satisfied  with  the  amount  of  work  done. 

As  soon  as  the  work  was  in  some  degree  systematized,  a 
record  of  the  daily  output  of  each  man  was  made.  The 
men  themselves  made  these  records,  and  they  could  not  dis- 
pute them.  As  improvement  was  made  and  the  output  in- 
creased it  was  soon  evident  to  the  men  themselves  that  it 
would  be  necessary  to  reduce  the  force.  Previously,  prac- 
tically all  of  the  sailmakers  in  the  immediate  vicinity  had 
been  employed  and  the  first  cut  in  the  force  brought  out  the 
fact  that  it  is  difficult  to  obtain  work  in  this  district.     With 


REDUCTIONS    IN    COSTS    DUE    TO    SCIENTIFIC    METHODS        2.yj 

Still  further  improvement  a  second  small  reduction  was  nec- 
essary, and  this  left  about  half  the  original  force.  These 
men  are  all  excellent  mechanics,  who  can  produce  a  large 
output.  The  majority  of  these  owned  their  homes  in,  and 
had  strong  ties  binding  them  to,  the  vicinity,  and  they  knew 
that  if  they  lost  their  jobs  they  would  have  to  leave  their 
homes  to  obtain  work.  This  brought  about  keen  competition 
between  the  men,  and  resulted  in  a  very  large  output. 

To  show  what  has  actually  been  accomplished,  a  few  of  the 
time  reductions  made  are  given  below,  the  names  of  the  work- 
men being  omitted : 


Time  Taken  in 

Making  Standard  Navy  Hammocks 

In  Lots  of  Ten 

All  Work  by   Hand.     Machine   Work    Not  Allowed                  | 

Times  Given  are  in  Minutes  for  One  Hammock 

Work- 

Time Taken 

First 

Records. 

Date. 

Date. 

Date. 

Date. 

men. 

4-I3-IO. 

4-16-10. 

4-20-10. 

4-22-10. 

I. 

120 

78 

72 

72 

2. 

I20 

78 

78 

78 

3- 

120 

90 

90 

90 

4- 

I20 

90 

84 

84 

5- 

I20 

90 

84 

84 

6. 

I20 

96 

84 

90 

7. 

I20 

102 

102 

90 

8. 

I20 

120 

120 

108 

72 

9- 

120 

120 

120 

108 

72 

10. 

I20 

120 

120 

108 

90 

II. 

I20 

120 

120 

96 

84 

12. 

I20 

120 

120 

120 

90 

13- 

I20 

120 

120 

96 

96 

14- 

I20 

120 

120 

96 

96 

These  figures  are  interesting.  Note  that  workman  i  and  2 
made  a  marked  reduction  at  once;  3,  4  and  5  did  very  well, 
while  6  and  7  held  back.  Workmen  8  to  14  determined  at 
first  that  they  would  make  no  cuts,  but  later,  facing  the  work 
done  by  the  other  men,  their  resolution  failed  and  a  moderate 
cut  was  made.     It  was  then  that  the  management  indicated 


238 


COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 


that  better  .output  was  expected.  A  new  lot  of  ten  hammocks 
was  ordered  of  each  of  these  men  (Nos.  8  to  14).  The 
man's  check  number  on  the  instruction  card  was  written  in 
large  red  figures  and  the  word  "  Conditional  "  was  written 
across  the  face  of  the  card  in  large  red  letters.  Nothing  was 
said  to  the  men,  but  it  was  seen  as  soon  as  the  instruction 
cards  were  issued  that  the  men  understood  the  warning.  Nos. 
8  and  9  equaled  the  best  records,  while  10,  11  and  12  made 


Fig.  44.    Eight  Hundred  Pound  Coaling  Bag.    Made  entirely  by  hand 
IN  3J4  hours.    Former  time,  12  hours. 

considerable  improvement;  13  and  14  did  not  improve  and 
were  discharged.  Further  reduction  can  be  made  by  substi- 
tuting machine  work  for  hand  work,  but  at  present  the  spec- 
ifications prescribe  hand  work. 

These  reductions  reduced  the  cost  of  hammocks  75  cents 
each,  and  as  large  quantities  are  required,  2,000  for  a  single 
large  ship,  the  saving  effected  is  considerable. 

The  time  required  in  making  clothes  bags,  2,000  of  which 


REDUCTIONS    IN    COSTS    DUE    TO    SCIENTIFIC    METHODS       .239 

are  required  for  each  large  ship,  was  reduced  from  60  minutes 
each  to  36  minutes  each. 

The  most  interesting  reduction,  however,  was  made  in  the 
manufacture  of  800-lb  coaHng  bags,  shown  in  Fig.  44.  The 
record  of  the  times,  taken  after  the  material  is  prepared,  is 
as  follows : 


Date. 


Work- 
men. 

First 
Record. 

3-5-10. 

4-6-10. 

5-10-10. 

5-16-10. 

6-2-10. 

6-15-10. 

I. 

390 

190 

180 

180 

171 

132 

2. 

390 

210 

195 

188 

180 

174 

156 

3- 

390 

220 

214 

188 

180 

180 

156 

4- 

390 

225 

210 

206 

180 

177 

5- 

390 

240 

206 

180 

180 

132 

For  exactly  the  same  work  it  will  be  seen  that  the  time 
was  reduced  from  390  minutes  per  bag  to  132. 

Cutting  out,  folding  and  creasing,  and  cutting  ropes  to 
length,  in  lots  of  100,  require  seven  minutes  each;  diagonal 
stitching  the  sides  and  bottoms  on  the  machine  in  lots  of  100 
takes  25  minutes  each.  The  total  time  taken  by  the  best 
workers  to  make  a  bag  complete  is  therefore  2  2-3  hours. 
When  the  diagonal  stitching  is  done  by  hand,  the  time  for 
each  bag  is  3^  hours. 

These  bags  are  well  made,  being  subjected  to  very  hard 
usage  in  coaling  ship,  800  pounds  of  coal  being  hoisted  in 
each  bag.  From  the  illustration,  the  amount  of  work  in- 
volved can  be  seen,  and  it  must  be  admitted  that  to  make 
one  of  these  bags  by  hand  in  3^4  hours  requires  skill  and  hard 
work.  It  is  not  believed  that  this  time  can  be  materially 
reduced  by  piece  work,  and  if  these  results  are  maintained 
there  is  little  or  no  advantage,  so  far  as  this  particular  work 
is  concerned,  in  either  piece  work  or  the  premium  system. 

Two  years  ago  12  hours  was  taken  to  manufacture  a  bag, 
while  a  year  ago  it  took  8  hours,  and  this  time  has  now  been 


240  COST    KEEPING    AND    SCIENTIFIC    MANAGEMENT 

reduced  to  less  than  3  hours.  As  the  pay  of  sailmakers  is 
58  cents  an  hour,  the  saving  effected  is  very  large. 

Similar  reductions  have  been  made  in  other  classes  of 
manufacture  work,  and  also  in  all  repair  work.  It  is  diffi- 
cult to  believe  that  such  large  reductions  can  be  made  in  work 
of  this  character,  but  the  records  are  vouched  for,  and  the 
performances  described  can  be  duplicated  at  any  time. 

The  reductions  in  cost  which  have  been  made  at  Mare 
Island  in  many  different  kinds  of  work  will,  it  is  hoped,  be 
sufficient  proof  that  an  analysis  and  study  of  the  work  in  any 
shop  where  the  usual  conditions  prevail  will  result  in  large 
reductions  in  cost.  Any  manager  of  a  commercial  shop  can 
go  further  on  the  road  to  Scientific  Management  than  was 
possible  in  the  government  establishment.  If  managers  will 
seriously  make  the  attempt,  the  companies  which  they  serve 
will  be  greatly  benefited,  and  the  managers  will  at  least  have 
the  satisfaction  of  knowing  that  they  are  doing  their  part 
in  .  the  march  of  progress  towards  scientific  methods  of 
management. 


THE  END 


INDEX 


Accountants,  expert,  with  no  knowledge  of  shop  conditions,  cannot  de- 
vise satisfactory  cost  system,  7. 

Accounting,  simple,  required  for  cost  keeping  purposes,  7. 

Accounting  versus  cost  keeping,  6. 

Accuracy,  importance  of  obtaining,  in  direct  labor  charges,  26. 

Advantages  of  cost  system  proposed,  69. 

Analysis  of  costs,  improvement  in  methods  due  to,  13,  114. 

Analysis  of  expense  accounts,  17,  95. 

Analysis  of  general  expense,  96. 

Analysis  of  indirect  charges  to  secure  working  minimum,  96. 

Analysis  of  shop  expense,  95. 

Analysis  of  work  before  it  is  undertaken,  119. 

Analysis  of  work  by  the  planning  department,  184. 

Analysis  of  work  in  a  joiner  shop,  225. 

Assistants  and  gang  bosses,  danger  of  obtaining  many  outside  of  the 
establishment,  156, 

Assistants,  shop  superintendent  should  have  competent,   144. 

Assistants  should  be  trained  to  be  thorough,  146. 

Average  expense  rates  should  not  be  used,  48. 


B 

Balance,  daily,  of  stores  should  be  furnished  the  shops,  168. 
Balance,  monthly,  of  accounts  desirable,   18. 
Balance,  monthly,  information  given  by,  18. 
Belt  bench  and  records  of  belts,  152. 
Belt  man,  duties  of,  152,  200. 
Belting,  care  of,  142,  151. 
Belts,  central  repair  station  for,  152. 

Belts,  detailed  written  instructions  regarding  care  of,  152. 
Blanks,  uniform  sizes  for,  55. 

Boatbuilding,  reductions  in  cost  made  at  Mare  Island,  233. 
Boiler  work,  reductions  in  costs  made  at  Mare  Island,  234. 
Blacksmith  shop,  improvements  made  by  means  of  time  studies,  131,  135. 
Blacksmith  shop,  see  Smith  shop. 
Breakage  of  tools,  149. 

Bonus  system  compared  with  the  premium  system,  107. 
Bonus  system  for  the  payment  of  labor,  107. 
Bonus  system  requires  a  scientific  rate-making  department,  iii. 
Boss,  gang,  duties  of,  198. 
Boss,  speed,  duties  of,  198. 

Bosses,  danger  of  obtaining  many  outside  of  the  establishment,   156. 
Bolt  machine  department  of  smith  shop,  213. 

Business,  to-day's  important,  shown  on  a  blackboard  in  the  planning  de- 
partment, 186. 

241 


242  INDEX 


Calking,  wood,  reductions  in  the  cost  of,  at  the  Mare  Island  Navy 
Yard,  233. 

Canvas  shop,  details  of  shop  system,  229. 

Canvas  shop,  organization  of,  227. 

Canvas  work,  reductions  in  the  cost  of,  at  the  Mare  Island  Navy  Yard, 
236. 

Central  repair  station  for  belts,  152, 

Central  tool  grinding  room,  148,  178, 

Central  tool  issue  room,  178. 

Changes,  output  must  not  suffer  during,  145. 

Changes  should  not  be  made  until  investigated  and  probable  results  fully 
considered,  146. 

Changes  should  not  be  put  into  effect  "on  trial,"  147. 

Charge  symbols  for  expense  accounts,  71. 

Check,  double,  system  for  issue  of  tools,  148. 

Clerk,  machine  shop,  duties  of,  195. 

Clerk,  smith  shop,  duties  of,  216. 

Comparison  of  indirect  charges  by  means  of  curves  or  parallel  columns, 
17,  95. 

Competition  most  feared  is  that  of  an  establishment  which  does  not  ob- 
tain accurate  costs,  4. 

Competition,  unprofitable,  among  machine  tool  builders  due  to  inaccurate 

costs,    2. 

Completion  of  work,  difficulty  of  obtaining  accurate  promises  of,   173. 

Conditions,  unsatisfactory,  must  be  reported  to  gang  bosses  by  the  work- 
men, 185. 

Conference,  daily,  of  manager  and  heads  of  departments,  182. 

Conference,  weekly,  of  heads  of  departments  and  foremen,  180. 

Contract  system  for  the  payment  of  labor,  loi. 

Control  of  expense  accounts,  95. 

Cooperation  among  members  of  planning  room  staff,  203. 

Cooperation  between  planning  department  and  gang  bosses,  203. 

Cooperation,  employers  must  do  their  part  to  obtain,  123. 

Cooperation  obtained  by  scientific  management,  123. 

Cost  analysis,  improvement  in  methods  due  to,  13,  114. 

Cost  figures  should  be  used  and  not  treated  as  mere  records,  65. 

Cost  keeping  versus  accounting,  6. 

Cost  of  work  card,  description  of,  67. 

Cost  section  records,  64. 

Cost  system,  information  that  can  be  obtained  from  a  proper,  13. 

Cost  system  secret  and  not  subject  to  criticism,  8. 

Cost  system  should  be  devised  by  an  expert  shop  organizer,  7. 

Cost  system,  uniform,  for  machine  tool  builders,  3. 

Cost  system,  uniform,  not  practicable  for  manufacturing  and  jobbing  re- 
pair shops,  3. 

Costs,  accurate,  an  essential  feature  of  good  management,  114. 

Costs,  inaccurate,  brought  about  ruinous  competition  among  machine  tool 
builders,  2. 

Costs,  inaccurate,  disturb  trade,  4. 

Costs,  inaccurate,  for  standard  articles,  2. 

Costs,  lack  of  interest  in  the  best  methods  for- obtaining,  11. 

Costs,  operation,  in  smith  shop,  219. 

Costs,  purposes  of,  11,  23. 

Costs  represent  work  accomplished,  13. 

Costs,  reductions  made  in,  at  the  Mare  Island  Navy  Yard,  232. 

Costs,  value  of,  not  realized  by  some  successful  managers,  8. 

Costs  which  are  scientifically  accurate  are  not  practicable,  23 

Cranes,  jib,  in  machine  shops  frequently  eliminate  much  wasted  time,  162. 


INDEX  243 

Criticism,  superficial,  of  expense  accounts,  will  usually  result  in  decreased 
efficiency,  88,  90. 

D 

Damage  report  form,  203. 

Damaged  work  or  machines  reported,  185,  200. 

Data  and  reports  not  necessary  for  the  purposes  of  costs  obscure  real 
objects  sought,  23. 

Day  work  can  be  improved,  100. 

Day  work  is  usually  unsatisfactory,  100. 

Day  work  system  for  the  payment  of  labor,  100. 

Defects  in  plant  equipment  frequently  overlooked,  135. 

Defects  must  be  known  before  they  can  be  remedied,  129. 

Defects  usually  unnoticed  detected  by  time  studies,  135. 

Delays  in  joiner  shop  due  to  poor  organization,  223, 

Depreciation,  decisions  of  courts  regarding,  30. 

Depreciation,  decisions  of  Interstate  Commerce  Commission,  30. 

Depreciation,  determination  of,  32. 

Depreciation,  determination  of  amount  to  be  charged  off  each  year,  33. 

Depreciation  due  to  gradual  wearing  out,  31. 

Depreciation  due  to  machines  or  appliances  becoming  obsolete,  31. 

Depreciation,  ignorance  regarding,  30. 

Depreciation,  Interstate  Commerce  Commission  refuses  to  promulgate 
standard  rates,  33. 

Depreciation,  machine  tool  builders*  rates  for,  32. 

Depreciation,  must  be  charged  to  output,  31. 

Depreciation,  treatment  of  in  foreign  countries,  30. 

Depreciation,  usual  methods  for  apportioning  are  unsatisfactory,  34. 

Diagram  of  organization  should  show  duties  and  responsibilities  of  each 
official  and  their  relations  to  each  other,  139, 

Differential  piece-rate  system  compared  with  the  premium  system,  107. 

Differential  piece-rate  system  for  the  payment  of  labor,  109. 

Differential   piece-rate   system   requires    a    scientific    rate-making    depart- 
ment, III. 

Direct  labor  charges,  importance  of  accuracy  in  obtaining,  26. 

Direct  labor,  definition  of,  24. 

Direct  labor  method  for  the  distribution  of  indirect  costs,  45. 

Direct  material,  definition  of,  27. 

Disciplinarian,  shop,  197. 

Dispatching  and  receiving  space  in  each  shop,  177,  185. 

Distribution  of  general  expense,  53. 

Distribution  of  indirect  costs,  any  scheme  of,  can  be  criticized,  41. 

Distribution  of  indirect  costs  by  direct  labor  hours,  48. 

Distribution  of  indirect  costs  by  direct  labor  wages,  45,  46. 

Distribution  of  indirect  costs  by  machine  rates,  42. 

Distribution  of   indirect   costs  must  be   in   accordance  with   benefits   re- 
ceived, 41. 

Distribution  of  indirect  cost,  simple  method  the  best  for  the  majority  of 
establishments,  49. 

Distribution  of  power  plant  expenses,  43,  82. 

Distribution  of  selling  expense,  54,  87. 

Distribution  of  shop  expense,  50,  53. 

Distribution  of  storehouse  expense,  53,  84. 

Dividends  paid  from  capital,  19. 

Drafting  room  considered  in  its  relation  to  the  shops,  166. 

Drafting  room  frequently  more  badly  managed  than  the  shops,  166. 

Drafting  room,  functional  management  in,  166. 

Drafting  room,  improvement  in  methods  of,  167. 


244  INDEX 

Drafting  room  should  be  systematized  by  an  expert,  i66. 

Drawings,  corrections  of,  should  be  reported,  i86. 

Drawings,  issue  to  workmen,  i86. 

Drive  methods  not  successful  in  dealing  with  workmen,  130. 

Drop  forge  department  of  smitl   shop,  1.31,  213. 

Duties  and  responsibilities  of  onicers  should  be  clearly  defined,  138. 


Economies  that  may  be  effected  are  indicated  by   an   analysis  of  costs, 

I3>  114- 
Efficiency  does  not  vary  inversely  as  the  number  of  non-producers,  88,  144. 
Energy  wasted  in  holding  up  that  which  has  been  built  up,  144. 
Enthusiasm  of  manager  and  heads  of  departments  necessary  if  the  highest 

efficiency  is  to  be  obtained,  166, 
Equipment,  poor,  wasted  time  due  to,  128. 
Expense  accounts,  control  of,  95. 

Expense  accounts,  retrenchment  usually  begins  with  reductions  in,  91. 
Expense  accounts,  superficial  criticism  of,  will  usually  result  in  decreased 

efficiency,  88,  90. 
Expense  accounts,  supervision  of,  17,  95. 

Expense  burden  sometimes  averaged  and  applied  to  all  labor,  21. 
Expense  percentage  can  be  reduced  by  employing  hand  work  for  machine 

work,  93. 
Expense  percentage  can  be  reduced  by  employing  high  class  labor  for  work 

that  should  be  done  by  inferior  labor,  92. 
Expense  percentage  can  be  reduced  by  reducing  the  output  of  employees, 

94. 
Expense  percentages  for  different  establishments  cannot  be  compared,  95. 
Expense,  shop,  can  be  reduced  by  neglect  of  machinery  and  appliances,  92. 
Exception  man,  the  foreman  should  be,   196. 

Expert  organizer  necessary  in  introducing  scientific  management,  138,  143. 
Expert  should  systematize  the  drafting  rooin,  166. 


Factory  cost,  definition  of,  29. 
Financial  control  versus  works  manager,  88. 

Fixed  charges  should  be  apportioned  to  shops  and  departments,  50. 
Flag  shop,  details  of  shop  system,  22^. 
Foreman,  duties  of,  196,  214. 
Foreman  is  the  exception  man,  196. 
Foreman  is  the  shop  disciplinarian,  197. 
Foreman,  smith  shop,  duties  of,  214. 
Foremen  make  suggestions  at  weekly  conference,  180. 
Foremen,  weekly  conference  of,  and  heads  of  departments,  180. 
Forge  work,  heavy,  213. 

Functional  duties  for  executive  officers,  139,  143. 
Functional  duties  in  the  shops,  155. 
Functional  duties  should  be  quietly  put  in  effect,  155. 
Functional  management,  F.  W.  Taylor,  on,  157. 
Functional  management  in  the  office  and  drafting  room,  165. 
Functional  management  outside  of  shops,  165. 

Functional  management,  superintendents  must  understand  principles  of, 
158. 

G 

Gang  boss,  duties  of,  198. 

Gantt  bonus  system  for  the  payment  of  labor,  107. 

Gantt,  H.  L.,  on  standardization,   164. 


INDEX  245 

Gantt,  H.  L.,  on  task  setting,  112. 

General  expense,  analysis  of,  96. 

General  expense,  definition  and  charge  symbols  for  subdivisions  of,  53,  71. 

Government  shops,  difficult  to  follow  tijie  best  methods  in,  169. 

Grinding  tools  by  workmen  should  be  'j^iTohibited,  148. 

Grinding,  tool,  should  be  done  in  central  grinding  room,  148,  178. 

Guesswork;  if  we  guess  at  the  cause  of  defects,  we  must  guess  at  the 

remedy,  129. 
Guesswork,  many  managers  fail  on  account  of,   129 

H 

Halsey  premium  plan  for  the  payment  of  labor,  103. 

Heat,  power  and  light,  subdivisions  of,  with  charge  symbols,  79. 

Heavy  forge  work,  213. 

History  of  each  department  or  shop  is  given  by  cost  records,  16. 

I 

Ideals,  scientific,  must  not  interfere  with  commercial  success,  40. 

Important  business,  to-day's,  186. 

Improvement  made  by  means  of  time  studies,  131,  135. 

Inaccurate  costs  brought  ruinous  competition  among  machine  tool  build- 
ers, 2. 

Inaccurate  costs  disturb  trade,  4. 

Inaccurate  costs  for  standard  articles,  2. 

Incentive,  lack  of,  under  the  daywork  system,  lOO. 

Index  cards  for  jigs  and  special  tools,  203. 

Indirect  charges,  analysis  of,  to  obtain  working  minimum,  17,  96. 

Indirect  charges,  comparison  of,  by  curves  or  parallel  columns,  17,  95, 

Indirect  charges,  definition  of,  29. 

Indirect  charges,  rnonthly  scrutiny  of,  by  the  manager,  17,  95. 

Indirect  cost,  definition  of,  29. 

Indirect  cost,  distribution  by  actual  rates  or  average  rates,  48. 

Indirect  cost,  distribution  by  direct  labor  hours,  48. 

Indirect  cost,  distribution  by  direct  labor  wages,  45,  46. 

Indirect  cost,  distribution  by  machine  rates,  42. 

Indirect  cost,  elements  of,  30,  71. 

Indirect  cost,  method  of  determination  should  depend  on  whether  work 
is  paid  for  on  the  basis  of  cost  plus  a  profit,  40. 

Indirect  cost  should  be  distributed  in  accordance  with  benefits  received,  41. 

Indirect  costs,  many  attach  themselves  to  machine  tools,  42. 

Industrial  railway,  use  of,  in  smith  shop,  213. 

Information,  many  complaints  that  it  cannot  be  obtained  from  accounting 
department,  67. 

Information  obtained  from  a  monthly  balance,  18. 

Information  regarding  costs  should  be  furnished  superintendents  and  fore- 
men, 65. 

Inspection  of  tools  when  turned  in  by  workmen,  148. 

Inspector,  duties  of,  199. 

Instruction  card,  machine  shop,  description  of,  192,  193. 

Instruction  card,  smith  shop,  description  of,  217. 

Instruction  card  holders,  202. 

Instruction  card  man,  192. 

Instructions  regarding  care  of  belts,  152. 

Insurance  and  Taxes,  36. 

Interest  and  rent  should  be  charged  to  product,  ^7. 

Interstate  Commerce  Commission,  hearings  before,  in  the  rate  cases,  137. 

Interstate  Commerce  Commission  refuses  to  promulgate  standard  rates  of 
depreciation,  :i^. 


246  INDEX 

Inventory  card  for  material  in  smith  shop  store,  222. 
Inventory,  perpetual,  of  tools,  148. 
Investigation  of  small  tool  equipment,  147. 

Investigation  to  determine  conditions  and  the  best  means  to  remove  de- 
fects, 145. 
Investigations,  assignment  of,  to  assistants,  145. 
Investigations,  complete  report  of,  should  be  made,  146. 

J 

Jigs  and  special  tools,  records  of,  154. 

Job  order  card,  description  of,  65. 

Job  order  or  production  order,  56, 

Job  orders,  numbering  of,  57. 

Joiner  -shop,  analysis  of  work  in,  225. 

Joiner  shop,  delays  due  to  poor  organization,  223, 

Jomer  shop,  details  of  shop  system,  223. 

Joiner  shop,  machine  work,  226. 

Joiner  shop,  organization  of,  222. 

Joiner  work,  planning  of,  226. 

Judgment,  good,  21. 

L 

Labor  and  material  charged  to  expense  orders,  64. 

Labor  charges,  daily,  should  represent  work  accomplished,  13. 

Labor  charges  should  receive  daily  supervision,   14. 

Labor  charges,  record  of,  62. 

Labor,  day  work,  can  be  improved  by  recording  the  daily  output  of  each 

employee,  100. 
Labor,  daywork,  usually  unsatisfactory  due  to  lack  of  incentive,  100. 
Labor,  direct,  definition  of,  24. 
Labor,  methods  followed  in  the  payment  of,  100. 
Labor,  payment  of,  under  the  bonus  system,  107. 
Labor,  payment  of,  under  the  contract  system.  loi. 
Labor,  payment  of,  under  the  day-work  system,  100. 
Labor,  payment  of,  under  the  differential  piece-rate  system,  109. 
Labor,  payment  of,  under  the  premium  system,  103. 
Light,  power  and  heat,  subdivisions  of,  with  charge  symbols,  79. 
Literature,  little  available  on  cost  keeping  for  manufacturers,  12. 
Loafing,  wasted  time  due  to,  127. 

M 

Machine  rate  method  for  distribution  of  indirect  costs.  42. 

Machine  shop,  Mare  Island,  condition  previous  to  the  application  of  scien- 
tific principles  of  management,  170. 

Machine  shop,  organization  of,  184. 

Machine  tool  builders'  association  rates  for  depreciation,  32. 

Machine  Tool  Builders'  Association  report  on  cost  keeping  methods,  2. 

Machine  tools  and  transmission  machinery,  care  of,  153. 

Alachine  tools,  repair  man  should  be  made  responsible  for  the  care  of,  154, 
200. 

Machine  tools,  many  indirect  costs  attach  themselves  to,  42. 

Machine  work  in  a  joiner  shop,  226. 

Alachine  work,  reductions  in  cost  of,  at  the  Mare  Island  Navy  Yard,  236, 

Machines  are  the  best  suited  to  each  operation  employed,   121. 

Maintenance  of  plant  equipment  is  a  profitable  field  for  investigation,  161. 

Maintenance  of  plant  equipment  should  be  under  supervision  of  an  ex- 
pert, 161,  163. 


INDEX  247 

Management,  accurate  cost  keeping  an  essential  part  of  good,  114. 

Management  an  art,  F.  W.  Taylor  on,  115. 

Management,  functional,  F.  W.  Taylor  on,  157. 

Management,  functional,  in  office  and  drafting  room,   165. 

Management,  functional,  outside  of  shops,  165. 

Management,  fundamental  principles  of,   117. 

Management,  system  of,  recommended  by  competent  engineers  increases 
overhead  expense,  115. 

Manager  and  heads  of  departments,  daily  conference  of,  182. 

Manager  can  develop  a  planning  department,  159. 

Manager  should  arouse  enthusiasm  for  scientific  methods,  166. 

Manager  should  be  fully  informed  of  fundamental  conditions  under  which 
work  is  accomplished,  135. 

■  Manager  should  investigate  his  own  plant  before  deciding  that  he  can 
derive  no  benefits  from  scientific  management,  124. 

Manager  should  know  the  amount  of  wasted  time  and  the  causes,  127,  129. 

Manager  should  know  what  is  taking  place  in  his  plant,  127,  129. 

Managers  fail  because  of  guesswork,   129. 

Managers,  some  successful,  do  not  realize  the  value  of  an  accurate  cost 
system,  8. 

Material  and  labor  charged  to  expense  orders,  64. 

Alaterial  and  move  man,  smith  shop,  216. 

Material  charges,  record  of,  63. 

Material,  direct,  definition  of,  27. 

Material  man,  duties  of,  190. 

Material,  minor,  obtained   from  shop  stores,  28,  63,   174. 

Material,  returned,  should  be  credited  to  the  job,  64. 

Material,  summary  of  requisitions   for,  68. 

Material  supply,  174. 

Material  supply,  smith  shop,  220. 

Material  transportation  by  plant  railway  system,  175. 

Material  transportation  by  regular  team  service,   177. 

Material,  transportation  of,  175. 

Material  unused  on  a  job,  should  be  returned  to  store,  64. 

Methods,  best,  for  doing  work  should  be  determined  before  work  is  be- 
gun, 120. 

Methods,  drive,  not  successful,  130, 

Methods  followed  in  a  government  plant  in  applying  the  principles  of 
scientific  management,   169. 

Methods,  standard,  can  and  should  be  improved,   165. 

Methods,  standardization  of,  164. 

Methods,  uneconomical,  exposed  at  weekly  conference,   181. 

Move  and  material  man,  smith  shop,  duties  of,  216. 

Move  man,  duties  of,  199. 

Mustering  the  workmen,  60. 

N 

Non-producers,  the  number  of,  is  no  measure  of  efficiency,  90,  144, 
Numbering  job  orders,  57. 

o 

Observation  card,  shop,  203. 

Obsolete,  depreciation  due  to  machines  and  appliances  becoming,  31. 
Office,  functional  management  in,   165. 
Officials  should  be  assigned  functional  duties,  139. 
Oil  fuel,  use  of  in  smith  shop,  135,  222. 

Opposition  of  foremen  to  the  employment  of  a  competent  shop  super- 
intendent, 142,  145. 


248  INDEX 

Opposition  to  changes  in  organization,  141. 

Orders,  shop,  description  of,  57,  173. 

Organization,  faults  of  usual  shipyard,  140. 

Organization  of  a  canvas  shop,  227. 

Organization  of  a  central  tool  grinding  and  issue  room,  178. 

Organization  of  a  flag  shop,  227. 

Organization  of  a  joiner  shop,  222. 

Organization  of  a  machine  shop,  184. 

Organization  of  a  smith  shop,  208. 

Organization  should  be  shown  by  diagram,  139, 

Overhead  charges,  relation  between,  and  total  cost,  89. 


Papers,  delivery  of  to  shops  and  offices,  171. 

Patterns,  standard,  first  piece  cast  from,  examined  by  planning  department, 
185. 

Percentages,  expense,  no  measure  of  efficiency,  95. 

Planner,  chief,  duties  of,  187. 

Planning  department,  beginning  of,   158,   159. 

Planning  department,  general  duties  of,  184. 

Planning  department,  general  instructions  to,  184. 

Planning  department  issues  detail  instructions  defining  duties  of  tool  room 
keepers,  tool  boys,  crane  men,  etc.,  187. 

Planning  department  issues  shop  orders,  186. 

Planning  department  makes  an  analysis  of  the  work,   184, 

Planning  department  should  control  time  studies,  161. 

Planning  department  supreme  in  routing  work,   184. 

Planning  department  which  can  be  developed  by  a  manager,   159. 

Plant  development  accounts,  85,  86. 

Plant  equipment,  defects  in,  frequently  overlooked  until  detail  investiga- 
tion is  made,  135,  162. 

Plant  equipment,  improvement  of,  expert  should  be  employed  in  large 
establishment  to  supervise,  163. 

Plant  equipment,  maintenance  of,  is  a  profitable  field  for  investigation, 
161. 

Plant  equipment,  small  additions  to,   frequently  increase  output,  162. 

Plant  equipment  sometimes  too  great,  162. 

Plant,  pneumatic,  economies  that  can  be  effected,  162, 

Plant,  upkeep  of,  36. 

Power,  heat  and  light,  subdivisions  of,  with  charge  symbols,  79. 

Power  plant  expense,  52. 

Power  plant  expense  distribution,  82. 

Premium  system  compared  with  the  bonus  system  and  differential  piece- 
rate  system,  107. 

Premium  system  for  the  payment  of  labor,  103, 

Principles,  fundamental,  which  are  applicable  to  all  good  cost  systems,  3. 

Production  order,  56. 

Profit,  does  every  line  make  a,  20,  21. 

Profit,  lines  which  show  none  should  be  eliminated,  20, 

Profitable,  is  every  department,  21. 

Progress  of  work  can  be  determined  from  the  daily  labor  charges,  13. 

Progress,  standards  are  not  foes  to,  164. 

Promises,  difficulty  in  obtaining  accurate,  for  completion  of  work,  173. 

Punishment  of  workmen,   172. 

Purposes  of  costs,  11,  23. 

R 

Railway,  industrial,  in  smith  shop,  213. 
Railway  system,  plant,  176. 


INDEX  249 

Rates,  shall  actual  or  average  be  used  to  distribute  indirect  charges,  43. 

Record  of  labor  charges,  62. 

Record  of  material  charges,  63. 

Record,  shop,  card,  203. 

Records,  cost  figures  should  not  be  mere,  65. 

Records,  cost  section,  64. 

Records  of  belts  necessary,  152. 

Records'  of  tools  ground  in  central  grinding  station,   179. 

Records  of  workmen,  172. 

Receiving  and  dispatching  space  in  each  shop,  177,  185. 

Reductions  in  cost  made  at  the  Mare  Island  Navy  Yard,  232. 

Rent  and  interest  charged  to  product,  n. 

Rent,  two  elements  of,  2>1- 

Repair  man,  duties  of,  200. 

Repair  man  responsible  for  condition  of  machine  tools,  154,  200. 

Reports  and  data  not  necessary  for  the  two  purposes  of  costs,  obscure 

real  objects,  23. 
Route  man,  smith  shop,  duties  of,  215. 
Route  sheet,  information  given  on,  187. 
Routing  work  by  the  planning  department,  187. 


Scientific  management,  adherence  to  the  principles  of,  reduced  costs  at 
the  Mare  Island  Navy  Yard,  232. 

Scientific  management,^  application  of  the  principles  of,  brings  about  co- 
operation, 123.         \ 

Scientific  management  defined,  117. 

Scientific  management,  many  see  only  machinery  of,   117. 

Scientific  management,  not  easy  to   follow  principles  of,   124. 

Scientific  management,  not  red  tape  methods,  116. 

Scientific  management,  opposition  to  will  eventually  disappear,  116,  137. 

Scientific  rate-making  department  necessary  with  the  bonus  system,  iii. 

Scrutiny,  monthly,  of  indirect  chaVges  by  the  manager,  17,  95. 

Secrecy  regarding  cost  systems,  8. 

Selling  expense,  54,  87.  ^ 

Selling  expense,  subdivisions  of,  with  charge  symbols,  86. 

Service  cards,  description  of,  62. 

Shop  clerk,  duties  of,  195,  216. 

Shop  expense,  75. 

Shop  expense,  analysis  of,  95. 

Shop  expense,  distribution  of,  50,  53. 

Shop  expense,  subdivisions,  with  charge  symbols,  75. 

Shop  observation  card,  203. 

Shop  orders,  description  of,  57,  173. 

Shop  orders  for  expense  account  work,  60. 

Shop  orders  for  output,  60. 

Shop  orders  issued  by  the  planning  department,  186. 

Shop  record  card,  203. 

Shop  superintendent  in  charge  of  shipyard  shops,  140. 

Shops,  relation  of  drafting  room  to,   166. 

Shipbuilding  costs,  reduction  of,  232. 

Shipyard  organization  is  usually  faulty,  140. 

Shipyard  pneumatic  plant,  investigation  of,  162. 

Shipyard  shops  should  form  one  homogeneous  organization  with  standard 
methods,  140. 

Smith  shop,  duties  of  assistant  foreman,  215. 

Smith  shop,  duties  of  clerk,  216. 

Smith  shop,  duties  of  foreman,  214. 


250  INDEX 

Smith  shop,  duties  of  material  and  move  man,  216. 

Smith  shop,  duties  of  route  man,  215. 

Smith  shop,  general  arrangement  of,  209,  213. 

Smith  shop,  industrial  railway  in,  213, 

Smith  shop,  instruction  cards,  217, 

Smith  shop,  material  supply,  220. 

Smith  shop,  oil  fuel  in,  135,  222. 

Smith  shop,  operation  costs,  219. 

Smith  shop,  operation  of  shop  system,  216. 

Smith  shop,  organization  of,  208. 

Smith  shop,  store  system,  222. 

Smith  shop,  subdepartments  of,  213, 

Smith  shop,  tools,  drawings  and  material,  assembly  of,  219, 

Smith  shop,  transportation  facilities,  213. 

Smith  shop,  work  board,  217,  218. 

Speed  boss,  duties  of,  198. 

Standard  methods  can  and  should  be  improved,  165. 

Standard  shapes  for  tools,  147. 

Standards  are  not  foes  to  progress,   164. 

Standards  should  be  best  methods  known  to  men  best  qualified  to  judge, 

164. 
Standards  should  be  clearly  defined  in  v^riting,  164. 
Standardization,  definition  of,  164, 
Standardization,  H.  L.  Gantt  on,  164. 
Standardization,  method  of,  164. 
Standing  order  board  man,  duties  of,  195. 
Standing  order  boards,  description  of,  201. 
Standing  order  slips,  briefs  of  instruction  cards,  193, 
Storehouse  expense,  52. 
Storehouse  expense,  distribution  of,  84. 
Storehouse  expense  subdivisions  with  charge  symbols,  83, 
Store  system,  improvement  of,  168. 
Store  system,  requirements  of,  t68. 
Stores,  shops  should  have  a  daily  balance  of,  168. 
Suggestions  made  by  foremen  at  weekly  conference,  180. 
Summary,  monthly,  of  expenditures  under  the  expense  accounts,  gg. 
Summary  of  material  requisitions,  68. 
Supervision,  daily,  of  labor  charges,  14. 
Supervision  of  expense  accounts,  17,  88,  95. 
Supply  of  small  tools,  148. 
System,  machine  shop,  operation  of,  201. 
System,  shop,  at  the  Mare  Island   Navy  Yard,  170. 


Task,  daily,  should  be  provided  for  every  employee,  138. 

Taxes  and  insurance,  36. 

Taylor  differential  piece-rate  system   for  the  payment  of  labor,  109. 

Taylor,  F.  W.,  on  functional  management,  157. 

Taylor,  F.  W.,  on  management  as  an  art,  115. 

Taylor,  F,  W.,  on  necessity  for  an  expert  to  introduce  scientific  manage- 
ment, 137. 

Taylor,  F.  W.,  on  task  setting,  iii. 

Team  service  between  shops  and  storehouse,  177. 

Time  cards,  description  of,  62. 

Time  studies  bring  out  defects  which  do  not  usually  attract  attention, 
135.  162. 

Time  studies  bring  out  fundamental  conditions  under  which  work  is  ac- 
complished, 135. 


INDEX  251 

Time  studies,  examples  of  improvements  made  by  means  of,   131,   135. 

Time  studies  indicate  remedy  for  defects,  161. 

Time  studies  should  be  made  under  the  direction  of  the  planning  de- 
partment, 161. 

Time  studies  show  wastes,  130. 

Time  studies,  use  of  in  making  improvements  in  a  smith  shop,  135. 

Time  study  man,  duties  of,  196. 

Tool,  central,  issuing  room,  178. 

Tool  delivery  boys,   148,  200. 

Tool  dressing  and  tempering  department  of  smith  shop,  213. 

Tool  equipment,  investigation  of  small,  147. 

Tool  issue  room,   future  expansion   should  be  provided,   149. 

Tool  making  and  repairing  should  be  done  in  the  shop  and  not  in  the 
tool  room,   150. 

Tool  steel,  disadvantage  of  several  kinds  for  the  same  purpose,   147. 

Tool  steel,  Navy  specifications,   147. 

Tool  steel,  uniform  quality  should  be  obtained,   147. 

Toolmaker,  head,  duties  of,  199. 

Tools,  breakage  of,  methods  to  be  followed,   149. 

Tools,  correct  card  inventory  of,  148. 

Tools,  delivery  of  to  machines,  200. 

Tools,  determination  of  standard  shapes,  147. 

Tools,  double  check  system  for  issue  of,  148. 

Tools,  grinding  of  by  workmen  should  be  prohibited,  148. 

Tools  should  be  supplied  workmen  by  tool  boys,  148,  200. 

Tools  should  receive  careful  inspection  when  turned  in  by  workmen,  148. 

Tools,  small,  ample  supply  necessary,  148. 

Tools,  special  and  jigs,  care  of,  and  records,  154. 

Tools,  special  and  jigs,  index  card  for,  203. 

Transportation  methods  are  of  great  importance,  175. 


V 


Upkeep  of  plant,  36. 

Urgent  work  and  papers,  175. 


V 
Value  of  product  must  sometimes  be  obtained  by  monthly  estimates,  18. 

W 

Wages  at  the  Mare  Island  Navy  Yard,  232. 

Waits,  unnecessary,  wasted  time  due  to,  128. 

Wasted  time  and  the  high  cost  of  living,  127. 

Wasted  time  detected  by  time  studies,  130. 

Wasted  time  due  to  employment  on  suitable  work,  128. 

Wasted  time  due  to   faults  of  employees  and  management,  129, 

Wasted  time  due  to  loafing,  127, 

Wasted  time  due  to  poor  equipment,  128. 

Wasted  time  due  to  unnecessary  waits,  128. 

Wasted  time,  manager  should  know  the  amount  and  the  causes,  130. 

Work,  accomplished  by  each  day-worker  should  be  recorded  daily,  100. 

Work,  best  methods   for,  should  be  determined  before  it  is   undertaken, 

120. 
Work,  damaged,  should  be  reported,  185,  200. 
Work  day  by  day  represented  by  direct  labor  cost,  13. 
Work  definitely  defined  on  job  order,  56. 

Work  in  each  shop  or  department  should  carry  its  own  burden,  50. 
Work  of  like  nature  should  be  grouped  under  one  head,   140,   155. 


252  INDEX 

Work,  promises  for  completion  of,  173. 

Work,  progress  of,  can  be  determined  from  the  daily  labor  charges,  13. 

Work  routed  by  planning  department,  184. 

Work  should  be  analyzed  before  it  is  undertaken,  119,  184. 

Work,  unsuitable,  wasted  time  due  to,  128. 

Workmen  best  suited  to  each  class  of  work  should  be  employed,   121. 

Workmen,  deserving  should  be  encouraged,   197. 

Workmen  do  not  respond  to  drive  methods,  130. 

Workmen,  muster  of,  60. 

Workmen,  punishment  of,  172. 

Workmen,  records  of,  172. 

Workmen  report  unsatisfactory  conditions  to  gang  bosses,  185. 

Workmen  should  not  go  to  tool  room  for  tools,  148,  200. 

Works  manager  versus  financial  control,  88. 


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